NCCI Accident-Year Ratio at 102%: What the 91% Headline Hides
NCCI's latest data shows workers' comp at a 91% combined ratio, but the accident-year number landed at 102%. For contractors approaching renewal, that gap tells the real story.
NCCI's 2026 State of the Line shows a 102% accident-year combined ratio for workers' comp in 2025 (NCCI AIS 2026, May 2026), meaning policies written last year didn't cover their own losses. The 91% calendar-year headline looks healthy only because carriers are releasing prior-year reserves to fill the gap. That reserve cushion, estimated at $14 billion, shrank from $16 billion a year earlier. Renewal terms for accounts with elevated mods will tighten as the tailwind fades.
Workers' comp carriers just reported their 12th consecutive year of underwriting profit. The number that makes that claim possible is 91%. The number that undermines it is 102%.
NCCI (the National Council on Compensation Insurance) released its 2026 State of the Line report on May 12, showing a calendar-year combined ratio of 91% for 2025. But the NCCI accident-year ratio, the one that measures whether policies written in 2025 actually covered their own losses, landed at 102% (NCCI AIS 2026, May 2026). Current-year underwriting is underwater. The profit is borrowed from the past.
What the accident-year ratio tells you that 91% doesn't
Combined ratio measures what carriers pay out relative to premium collected. Simple division. Calendar-year results fold in everything: this year's claims, last year's reserve adjustments, a decade's worth of favorable development. When old claims close for less than reserved, that surplus flatters the current year's result.
Accident-year results strip that flattery out. They ask one question: did the premium collected on 2025 policies cover 2025 losses? At 102%, the answer is no. For every dollar of premium carriers wrote in 2025, they paid out $1.02 in losses and expenses (NCCI AIS 2026, May 2026).
The 11-point gap between 91% and 102% is funded entirely by releasing reserves set aside in prior years. That's not a sign of health. It's a sign of dependency.
The $14 billion cushion is finite
NCCI estimates the industry's redundant reserve position at $14 billion as of year-end 2025, roughly 12% of total carried reserves (NCCI AIS 2026, May 2026). A year ago that number was $16 billion. Two consecutive years of decline.
Those reserves were built during a period when carriers routinely set case reserves higher than claims ultimately cost. The surplus accumulated over years. Now carriers are drawing it down to bridge the gap between accident-year losses and filed premium levels.
The math is straightforward. If carriers keep releasing reserves at the current pace while accident-year results stay above 100%, the cushion thins each year. Calendar-year results converge toward accident-year reality. When they converge, rates have to move. That convergence doesn't happen overnight, but it doesn't announce itself with a press release either.
Severity is outrunning frequency
Two forces determine whether claim costs rise or fall: how many claims happen (frequency) and how much each one costs (severity). For years, falling frequency offset rising severity. Fewer workplace injuries meant carriers could absorb higher per-claim costs without raising rates.
That offset is weakening. Lost-time claim frequency fell just 2% in 2025, a slower decline than the long-term trend (NCCI AIS 2026, May 2026). Medical severity rose 4%. Indemnity severity rose 4%. NCCI noted that medical severity is now growing faster than the Workers Compensation Weighted Medical Price Index, meaning utilization is driving costs, not just price (NCCI AIS 2026, May 2026).
Construction-sector frequency has declined nearly 40% since 2015 (NCCI AIS 2026, May 2026). Remarkable improvement. But the gains are getting smaller each year, and severity isn't slowing to match. When frequency can't fall fast enough to offset severity, underwriting results deteriorate. That's exactly what the 102% accident-year number reflects.
Your 12-to-18-month window
Workers' comp is the only major commercial line still posting negative renewal rate changes. The Ivans Index shows an average renewal rate change of -1.35% in April 2026 (Ivans, May 2026). Commercial auto, general liability, umbrella, property: all positive, some by 7% or more.
That gap won't persist once accident-year pressure works through NCCI's filing cycle. Approved NCCI filings for the 2025-to-2026 period project an average premium decrease of 5.0%, smaller than the 6.1% decrease filed the year before (NCCI AIS 2026, May 2026). The rate of decrease is already decelerating. Individual state filings range from -15.6% to +21.6%, with wide variation based on local loss experience.
In our reviews of Southeast contractor worksheets, accounts with mods above 1.10 are already facing carrier selectivity that doesn't match a "soft market." The underwriting conversation has shifted. Carriers are pricing to accident-year results, not calendar-year headlines.
The practical window to lock in favorable terms, correct worksheet errors, and invest in loss-reduction programs that protect your EMR (Experience Modification Rate, also called "the mod") is measured in quarters, not years. Contractors renewing in late 2026 or early 2027 still have time. That window narrows as reserve releases thin and filed rates catch up with what accident-year data has been saying for two years running.
What an audit would check
An audit examines whether the data on your NCCI worksheet reflects reality: correct classification codes for the work your crews perform, claim reserves that haven't drifted from actual cost, and payroll figures that match your records. A mod inflated by stale data costs more when the base rate is flat. It costs significantly more if rates start moving up. Getting the worksheet right before the cycle turns is where the math works in your favor.
Request a free worksheet review and see where your mod stands before the market catches up to the 102%.