Claims funding options submitted to government EL review

The separation of long-tail occupational disease claims from accident claims will be the key proposal in the submission that the ABI will make to the Department of Work and Pensions review into employers' liability (EL) insurance later this week.

The ABI will propose three possible options for funding long-tail occupational disease claims including an employer-backed mutual fund, a fund backed by a levy on EL premiums or insuring long-tail occupational diseases on a `claims-made' rather than the existing `losses occuring' basis.

An ABI spokesman said that with long-tail occupational disease claims currently accounting for around 25% of all EL claims, and with this figure expected to increase in future, addressing the funding of long-tail occupational disease claims was "one of the practical solutions".

But a key element in any separation of long-tail occupational disease claims will be defining what constitutes `long-tail'. The ABI said there was currently no hard and fast definition.

Head of health and safety at the Engineering Employers' Federation (EEF), Gary Booton said that in principle, the EEF supported the separation of long-tail occupational disease claims, but it would "have reservations" about a compensation pool funded by employers. Booten said that rather than introduce a new levy on premiums, the existing 5% insurance premiums tax should be used to fund any compensation pool.

Royal & SunAlliance technical insurance manager Phil Bell said that the insurer had contributed to the ABI response and fully supported the ABI's position. "We believe that fundamental reform to EL is required," he said. "The existing system basically doesn't work."