A.M. Best & Co. on Wednesday revised its market segment outlook from negative to stable for the U.S. workers' compensation insurance market, noting several influencing factors.

Most significantly, A.M. Best cites an unexpected “muting” effect the COVID-19 pandemic had on insurers’ balance sheets and operating performance.

The negative impact of the pandemic on insurers’ top lines is waning and premium levels are returning to pre-pandemic levels as businesses — particularly the hospitality and service industries ­— continue to bounce back in 2021.

Another driving factor stabilizing the market, A.M. Best says, is that the comp segment’s solid level of risk-adjusted capitalization will withstand the effects of the pandemic. According to the report, this segment remains in a redundant loss position, although the redundancy is diminishing.

The comp market also continues to report favorable combined ratios driven by consistent loss ratios. Underwriting results have deteriorated only slightly, benefiting from lesser fraud, fewer workplace accidents and lower defense costs, the report states.

Researchers note potential offsetting factors to the market to watch, as well. The possibility of claims latency and the potential long-term health effects of the virus remain concerns, A.M. Best says, along with regulatory and legislative actions that could affect the ultimate cost of certain claims.

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