As danger in Iraq increases, cost to insure workers grows

Insurance costs for one company in Iraq have nearly tripled.
NEW YORK (AP) -- When Vulcan AMPS dispatched a team of workers to Iraq last fall, managers knew it would be risky. What they didn't count on was just how much more expensive it would become to insure employees and the company against those dangers.
"The cost is certainly driven up based on the risk," said Michael Stewart, chief administrative officer for the mobile power plant maker, whose insurance bill in Iraq has jumped from $5,600 a month per worker to about $14,500. The costs have been compounded by an assignment that has stretched long past initial expectations.
"Did we anticipate that? No, we really didn't," Stewart said.
Other companies with contracts in Iraq are coming to a similar realization, after watching the cost of insuring workers assigned to the country jump in recent months.
Required by law
Federal law requires government contractors to take out some death, disability and medical insure for workers assigned overseas, and reimburses insurers if a worker is killed or injured. Mounting deaths and injuries to contract workers in Iraq threaten to cost the federal government far more than the $1 million to $2 million it usually pays out per year under the law.
But some contractors also are footing much larger than expected bills. Many have taken out more insurance than required by law as a way to attract and reassure workers, and then were forced to keep workers in the country months longer than planned because of circumstances including violence and sabotage.
Insurers, who expected casualties among civilian workers to have subsided long ago, have raised premiums in response to the killings of contract workers in Iraq.
"The market reacts to what's going on," said Peter Schulteis, executive vice president of Global Underwriters Inc. in Cincinnati, which matches employers with coverage for workers in Iraq.
Schulteis and other brokers say the costs of insuring workers in Iraq vary widely, depending on the part of the country they are in, what they are doing there, whether or not they are clustered together with other workers and other factors.
As a result, the cost for insuring some workers in low-risk roles has seen little change.
"It really depends on what folks are doing. We have clients who have people over there who are just really manning copying centers," said Christopher Moody, vice president of Moody Insurance Worldwide, a broker.
Some have tough time
But other employers are paying much more than before, and are having an increasingly difficult time finding insurers willing to take the risk, said Joel Greengarten, senior vice president of Frenkel & amp; Co., a New York broker.
"Now some insurers have outright restrictions on providing it," he said. "Insurers are not going to continue to provide something when their return is a loser."
That has driven up costs for some contract firms already and could mean higher bills for others later, once time runs out on initial coverage, brokers said.
Greengarten said coverage required under the Defense Base Act until recently cost employers 10 percent to 15 percent of their payroll, but is heading toward 25 percent to 30 percent.
Some employers, seeking to attract and reassure workers, have taken out additional insurance, whose cost has also risen.
"It's probably the most dangerous place in the world right now and if you want your employee to go there the compensation package must be commensurate with the risk," said Harold Skipper, professor of risk management and insurance at Georgia State University in Atlanta.