Grasping the unknown: Understanding workers’ compensation accumulations

Since the 9/11 terrorism attacks, the insurance and reinsurance industries have intensified their efforts to develop a better understanding of workers’ compensation accumulations. “Known” accumulations – which identify where people typically work most of the time – are well accounted for by existing models. But how do cedents, reinsurers and rating agencies come to grips with the possibility of a major catastrophe taking place at an event or tradeshow, such as NCCI, that draws hundreds – if not thousands – of participants from around the world? According to Emil Metropoulos, a senior vice president at reinsurance broker, Guy Carpenter, it is precisely these “unknown” workers’ compensation accumulations, affecting employees who travel in large groups away from the workplace, that have the potential to severely impact a cedent’s workers’ compensation portfolio. Here, Mr Metropoulos explains how gaining an understanding of both known and unknown accumulations – taking into account all potential vulnerabilities (both mutually exclusive and combined) – is critical to effective workers’ compensation underwriting