Roughly 100,000 private contractors work for the U.S. government in Iraq, and every one of them must be insured against getting killed or hurt on the job.

Given the dangers of war, insuring the contractors would seem to be an underwriter's nightmare. But it's not.

U.S. taxpayers pay the premiums to insurance companies for these contractors. When the contractors are killed or injured in war, taxpayers pay the benefits, too.

This unusual arrangement is the result of two World War II-era laws: the 1941 Defense Base Act requires contractors to be insured, and the 1942 War Hazards Compensation Act allows the insurers to apply to the U.S. government to cover the payments for contractors killed or injured.

An insurance industry spokesman said the law makes sense because no one will insure against acts of war. "War is not an insurable risk," said Bruce Wood of the American Insurance Association. "You can't predict the frequency or the severity."

Bunny Greenhouse, a top contracting officer for the Army Corps of Engineers, said that insurance companies have charged exorbitant premiums, considering that it is taxpayers who are taking the risks.

"The insurance companies are getting over on us," Greenhouse said. "This has been accepted because no one looked into it."

The cost of insurance for contractors on the battlefield is at record levels; 100,000 contractors are in Iraq now, far more than in the Persian Gulf war in 1991, when 9,200 private contractors were used. This unprecedented use of private contractors -- driven in part by the relatively small number of troops deployed to Iraq -- is a mounting, open-ended tab for taxpayers.

It is impossible to say how much the insurance costs. No agency regulates the premiums, and no one tracks the overall costs.

One thing is certain: These costs have risen quickly and will continue to grow as the Department of Defense turns more and more to private companies to supply troops, provide security and rebuild infrastructure. The number of contractors covered by the insurance has grown more than sevenfold in the past five years and will continue to grow, according to AIG, the insurance giant.

Most of the contractors and subcontractors work for the Department of Defense. They serve meals, drive trucks, guard buildings and rebuild roads and sewers.

In the first gulf war, seven contractors were killed. As of October, 646 U.S.-financed private contractors had been killed in Iraq. Most deaths stem from acts of war, insurance and government officials say. This allows the insurance companies to ask the U.S. Department of Labor to pay all future benefits and reimburse the insurers for all payments, plus 15 percent for processing the claims.

In the past six years, insurance companies have filed 186 such claims, 140 of them from Iraq. The Department of Labor has made reimbursements in 81 of the cases; most of the remaining cases have not been resolved. The average reimbursement was $48,412; this figure does not include ongoing payments the government will make.

Relying on contractors

Defense Base Act insurance is a workers' compensation policy created by Congress as World War II loomed to insure workers at remote bases: divers pulling up ships sunk at Pearl Harbor, for example, or welders repairing damaged ships. At the time, no one envisioned a war where the number of contractors would nearly match the number of troops, performing jobs once handled by the military.

The Defense Base Act requires this insurance on all U.S.-funded projects overseas. The insurance covers medical expenses, time lost from work and disability and death benefits. It covers all U.S.-financed contractors, whether it is an American engineer or an Iraqi truck driver.

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