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The Actuary The magazine of the Institute & Faculty of Actuaries

Asbestos – worst yet to come?

Huge exposures threatening the international insurance industry will make efficient run-off procedures more important than ever, a conference in London has been told.

The Association of Run-off Companies’ annual congress heard that while asbestos claims in the US may have peaked in the past year, it could be some time between 2008 and 2011 before the situation comes under control in the UK. David Slater, of Watson Wyatt, who has done work for Lloyd’s and the wider market, referred to a huge rise in non-malignant claim numbers in Britain in the past few years.

He said the insurance market was being bombarded by new types of claims, including those related to toxic mould, where action was spreading from Texas to other states and now covered commercial property. Mr Slater said asbestos is still the main bugbear, as reflected by massive reserve strengthening by insurers recently, particularly in the US. ‘US asbestos is probably the worst example of all at the moment. There has been a truly massive deterioration.’

He said the primary reason for this is a substantial increase in claim numbers filed by individual plaintiffs in the US. According to statistics from the Manville Trust in the US, there are now triple the number of claims there were three years ago. The mix of claims has also shifted, Mr Slater said, as more and more claimants with less serious conditions are represented by new law firms using every technique to attract them.

Only 6% of claims in 2000 were from defendants suffering from mesothelioma or lung cancer. There are 600,000 individual claims filed in the US and it is estimated there will ultimately be between 1m and 3m. ‘The question is whether the efforts of US lawyers have brought claims forward or discovered a completely new type of claim,’ he said.