Insurers feeling the effects of Sept. 11 have taken desperate measures to stay afloat by increasing rates and rewriting policies with little room for loss. Workers’ compensation continues to have a hard time keeping up as state regulators consistently inspect their policies and underwriting terms.
According to a recent report by Standard & Poor’s, the majority of states aren’t allowing primary companies, which they regulate, to exclude terrorism from workers’ compensation, even though they have allowed exclusions on other policies. Additionally, reinsurers are now excluding terrorism coverage on renewal polices which began in January.
Donald S. Watson, director of S&P’s Financial Services Ratings in New York, noted that insurers are pulling away from workers’ comp due to its difficult underwriting procedures. Without the benefit of reinsurance or a federal backstop on terrorism, companies are not going to be as willing to take that risk.
Rate hikes of up to 8 percent for catastrophe coverage are being sought by insurers in New York State, while regulators have implied that they may not approve a 4 percent increase for catastrophe coverage being sought in 34 states by the National Council on Compensation Insurance.
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