Employers' liability insurance : an analysis of latency risks and claims

Abstract

The latency risk associated with Employers' Liability Insurance is a developing area that requires a systematic understanding. There are challenges in dealing with latent EL claims arising because of the long period from the exposure through to the ultimate manifestation of the injury. During this period, employers may no longer be in business, insurers may be insolvent, or insurance documentation completely lost or destroyed. Although Maltese insurers understand that latency risks are increasing in importance, currently these risks are not well catered for both in underwriting and in the handling of claims. In the UK, although literature suggests that there are difficulties in pricing and reserving, there is a more thorough consideration of latency. The UK market has developed guidelines and legal practices to ensure that the victim is well compensated which is all supported by the UK's compulsory regime. On the other hand, the Maltese EL Insurance is to date still voluntary although, local insurers have discussed the need to meticulously consider the implications of changing to compulsory EL Insurance. The findings ultimately suggest that latency risks are not to be understated. In the local scenario a more active approach is to be taken by insurers in order to accurately understand and device means to manage the latent exposure in EL Insurance. The risks are challenging to eliminate but the UK insurance market proved that actions can be taken to ensure a more streamlined approach in dealing with claims and in compensating victims.