NSW state-owned icare has reported a $876 million net loss for its workers' compensation Nominal Insurer scheme last financial year amid rising medical costs and falling bond yields.

Gross written premium was $2.586 billion while net claims expenses/scheme costs were $4.064 billion, the annual report released today on the icare website shows.

The scheme reported an underwriting loss of $2.391 billion, while it received net investment revenue of $1.647 billion.

In the previous year, the Nominal Insurer scheme reported a net profit of $88.9 million.

icare says the past financial year has been a challenging one for the financial performance of its schemes and it has had limited ability to control or influence some factors significantly affecting the results.

“Some of these factors are likely to continue to put pressure on results into the next financial year, requiring ongoing monitoring and proactive financial risk management,” the report says.

A fall in bond yields resulted in an increase in claims liabilities, partially offset by reducing inflation assumptions.

“In aggregate economic assumptions, bond yields and inflation have adversely impacted icare’s schemes by around $2.2 billion,” it says.

Results across other schemes show the self-insurance scheme, excluding the Home Building Compensation Fund, reported a net profit of $607 million.

The Home Building Compensation Fund reported a loss of $202 million, Lifetime Care a net loss of $576 million and Dust Disease Care a loss of $11 million.

Insurance liability strengthening due to rising costs adversely impacted the Nominal Insurer’s financial results by $700 million and there is ongoing uncertainty on projected levels of future medical inflation, the report says.

Since 2015 average medical costs per claim have increased by around 40% in part due to the NSW workers' compensation system in many cases paying Australian Medical Association rates plus 50% which no other Australian jurisdiction does, it says.

“While icare can influence, and has some limited control over medical costs, we need to work with the State Insurance Regulatory Authority (SIRA) to address the issue including their fee scales,” it says.

icare says results have also been affected by scheme reforms which saw significant releases in reserves that favourably impacted results prior to icare’s formation, followed by reserves strengthening.

CEO John Nagle says during the past year icare has issued 37,000 new workers insurance policies and renewed more than 288,000.

“Premiums remain stable at 1.4% of base-average wages, achieved through active management of claims and premium leakage and further streamlining of our operating model,” he said.

“We are driven to keep improving our performance and refining our operations to ensure they enable the long-term sustainability of all our insurance schemes.”