No private sector pooling program could be created to cover such an occurrence, the report titled "Workers' Compensation Terrorism Reinsurance Pool Feasibility Study" concluded.

Charles Wolstein, managing consultant with the Tillinghast business of Towers Perrin, and the study leader, said the six-month analysis was based on simulation models of terrorist events. A pool program, he noted, could benefit companies in a small to moderate event, but in a major event, "it could not protect the industry on a stand-alone basis."

"What emerges is that some federal role will be critical for workers' comp," he said. "A voluntary pool could develop as a private market, but it needs to be integrated with a federal backstop situation on top of it."

He said this is the first study done to examine what could replace the current Terrorism Risk Insurance Act, which is due to expire Dec. 31, 2005. While there are other solutions, such as securitization, to be considered, it appears some federal role is essential in the future related to terrorism and workers' comp, the study found.

"The reality is the private sector can't do it alone," Mr. Wolstein added. "It can play an important role, but in partnership with the federal government."

The study was commissioned by 14 workers' comp carriers through two company trade groups, the Washington, D.C.-based American Insurance Association and Des Plaines, Ill.-based Property Casualty Insurers Association of America.

Debra T. Ballen, executive vice president of public policy management for AIA, said that the study was done to understand the feasibility of an insurer-created pooling program. The report found that a reinsurance pooling for workers' comp is not currently practical. The work now, in the face of these findings, she said, will be to translate this into public policy.

"If you translate what was done on an operational level into the public policy arena, we would hope that policy makers will look at some of the [lessons in] the report?and understand the need for the backstop," she said. "And some of the numbers in the report will help them better understand that."

"[The report] tells us generally about the need for a federal backstop and puts us a step ahead of where we were shortly after 9/11, with respect to at least understanding how this mechanism (pooling) might work as part of a larger federal scheme," she concluded.

Copies of the report can be viewed at: www.towersperrin.com/tillinghast/r/wcterrorism_pool.htm.

The report was produced by the Stanford, Conn., office of Tillinghast and Towers Perrin in Philadelphia.