CHICAGO (Dow Jones Newswires) ? In a nod to the growing importance of worker compensation insurance for US contractors working overseas, American International Group Inc. (AIG) said on Monday it has opened a claims office in Dubai to handle its Defense Base Act insurance program claims coming from Gulf region countries including Iraq and Afghanistan.

AIG spokesman Peter Tulupman said the Dubai office would help expedite claims processing in the region. AIG has also established a benefit delivery system in Iraq to speed payments to beneficiaries.

AIG, along with insurers ACE Ltd. (ACE), Chubb Corp. (CB) and CNA Financial Corp. (CNA), is said to be among the top providers of DBA coverage. The Defense Base Act of 1941 requires that US contractors in overseas locations provide worker compensation coverage to their employees.

Tulupman said AIG would not give out numbers on its market share in the region or how much it earns from the business.

William House, a senior vice president with ACE?s US business, says his company currently outsources its Gulf region claims administration, but might consider opening its own office ?down the road.?

Although he said it was nearly impossible to estimate market share, his company is one of the three largest providers of DBA insurance. He said the number of overseas workers covered by DBA has risen significantly in recent years, especially in the Middle East, and ?there is a lot more emphasis on contractors doing business with the government.?

A spokesman for Chubb said that although the company does DBA business in Iraq and Afghanistan, it does not have a claims office there.

He could not give an estimate of Chubb?s market share or ranking in the market. A CNA spokeswoman said the company did not typically respond to DBA questions.

The price of the insurance has recently become an issue as government agencies have reported concern over the escalating cost of buying the coverage in world hot spots such as Afghanistan and Iraq.

A General Accounting Office report in April said the rate for Department of Defense contractors in Iraq runs as high as $10 to $21 per every $100 of salary. The agency said around 150,000 Iraqis were covered by the insurance in March, and workers from other countries, including the US, would also be eligible for coverage.

One agency, the Army Corps of Engineers, proposed in March that it seek out bids and award the business to one provider in order to control costs.