Study
Analyzes Effects of 9/11 on Nationwide
Workers' Comp Insurers
By
Insurance Journal
Jan.
11, 2002
According
to a Standard & Poor's study released Jan.
9, the effects of the Sept. 11 attacks are
taking a toll on workers compensation
insurers. Rates are ready to rise and it has
become increasingly difficult for employers to
obtain coverage.
As
reported in the Wall Street Journal,
insurers have realized that there are
concentrations of risk that have not been
previously considered in underwriting
decisions. Catastrophic workers' comp losses
were not an issue before the Sept. 11
terrorist attacks, according to Robert Smith
of Willis Group Holdings Ltd., and now large
companies grouped in one area are considered a
significant risk. The executive officer states
that agents and brokers are now required to
list locations of more than 100 employees by
most insurers, and in many cases disqualifying
those companies from being insured.
In
addition to the increased risk of insuring
large companies, rate increases are set to
take effect in excess of as much as 50 percent
nationwide, according to S&P. Workers'
comp coverage is unlike other types of
coverage in that it is not allowed to exclude
war or terrorism from its coverage by state
insurers.
Many
lines of coverage have been granted terrorism
exclusions by their states, and without the
benefit of reinsurance, this means greater
risks.
Many
of the world's major reinsurers announced that
they would not provide coverage for terrorism
after the Sept. 11 attacks. Workers' comp
insurance simply cannot exclude this type of
coverage, thus making it difficult to insure
and unaffordable to insurers.
According
to the S&P report, insurers could easily
become bankrupt after a terrorist attack on a
large corporation. Already, the losses for
workers' comp insurance are expected to
account for 10 percent, or about $4 billion of
the total loss.
Due
to tight state regulations, S&P predicts
that the increases will likely develop over
time, as companies seek approval of them.
The
problems of workers' comp coverage continue on
Capitol Hill, as U.S. lawmakers have been thus
far unable to develop a federal terrorism
insurance bill. Congress returns on Jan. 22.
The
Wall Street Journal article concluded
by noting that the response of the federal
government in the coming months will be vital
to the survival of the workers' comp industry.
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