The private insurance industry for workers' compensation would not have enough capital to withstand potential losses on its own should a catastrophic terrorism event, or multiple events, occur, according to the Workers' Compensation Terrorism Reinsurance Pool Feasibility Study conducted by the Tillinghast and Reinsurance businesses of Towers Perrin.
Terrorism and insurance experts have conceived of plausible catastrophic terrorism events that generate workers' compensation losses of $90 billion or more, roughly three times the $30 billion in capital backing the workers' compensation line of business. Unlike property insurance, workers' comp providers cannot introduce terrorism coverage exclusions, nor can they limit their potential losses on any policy, but are obligated to pay wage loss and medical benefits to workers injured on the job, without regard to cause and without limit, the study noted.
The analysis is intended to serve as a starting point for further discussion, and as an aid to those evaluating the need for a federal terrorism insurance program. It can be read at www.towersperrin.com/tillinghast.
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