Work being done to inform the Department for Work and Pensions' (DWP) second report into employers' liability (EL) has called into question the magnitude of the crisis.

Market sources said that the Health & Safety Executive's (HSE), study into EL compliance levels has revealed that the number of companies trading without cover is "much lower than expected". HSE policy adviser Steve Vinton declined to comment on the study's findings.

The Federation of Small Business (FSB) said it was concerned that the findings may diminish the DWP's appetite to reform the market.

"We don't think that the DWP should take this as a trigger that there is no problem," said head of parliamentary affairs at the FSB, Stephen Alambritis. "This is positive news, as it means businesses are footing the bill, but at what cost?"

Alambritis said a survey conducted by the FSB earlier this year found that 8% of businesses were trading without cover.

Meanwhile, work commissioned by the ABI into the viability of establishing a separate fund for long-tail disease risks will not be completed in time to inform the DWP's report.

The DWP is now expected to report in early December but the ABI head of liability Paul Fegan said its study will not be completed until February.

The issue of legal costs in EL is also expected to feature in the DWP's report, which has led the Civil Justice Council (CJC) to turn its attention to legal costs in employers' and public liability cases, with a series of mediation meetings early next year.

Negotiations will cover the award of success fees, in line with the successful road traffic accident agreement reached in October.

Secretary to the CJC Bob Musgrove said: "We are incredibly keen to get a solution on this. It will take a number of months as it is a very complicated process."

The CJC will receive a data analysis report on legal costs in the EL and PL sectors next month, before calling a series of mediation meetings with representatives from the insurance and legal industries.

An Allianz Cornhill spokeswoman said the insurer was keen to be involved in any meetings.

Musgrove said: "Our aim is to make legal costs more predictable while maintaining or improving access to justice."

On 26 November the CJC will host a presentation by the Association of Medical Reporting Organisations (AMRO) on how to bring greater predictability to road accident medical reporting claims.