The insurance industry has told government that the current framework for employers' liability in the UK is unsustainable.

At a meeting between the Association of British Insurers (ABI) and the Treasury earlier this week, insurers warned that a combination of spiralling workplace accident and disease claims, allied with the current hard market, is threatening the economic prosperity of UK businesses.

Royal & SunAlliance (R&SA) technical manager Phil Bell, who was at the meeting, said: "We have seen a number of businesses go under because they can't get employers' liability (EL) insurance."

The problem is that EL is an unattractive line of business, added Bell.

"The current regime was set up to deal with workplace accidents - like slips, trips and falls - not long-tail industrial diseases," he said.

"I would challenge anyone to put any of their own money up for EL cover," Bell said.

Bell added that the continuing success of the no-win, no-fee system, as exemplified by last week's Lords ruling on Callery v Gray, was the biggest reason that the current regime must change.

ABI head of general insurance John Parker added: "We put the view that the current EL system is not sustainable."

But, Parker warned, the industry should not expect immediate action. "It is unrealistic for a government to tackle this issue mid-term. We think it would be suitable for the next term."

Bell said that the government is taking the situation seriously. "The Treasury is not just fact-finding for the sake of it," he said.

Among the key changes insurers are looking for is a change in EL legislation. "We would want to see the exclusion of industrial disease from any future legislation," Bell said.

The move follows discussions between Financial Services Authority (FSA) managing director John Tiner and The Underwriter chief executive Keith Rutter last week. Tiner is investigating Rutter's claims that lack of liability cover is undermining UK economic performance in the construction sector.

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