Equitas toughens on asbestos claims

EQUITAS, the insurance business set up by Lloyd's of London to handle asbestos claims, is taking a tougher line on claims from America. The insurer has refused payments to some of its American company policyholders if they cannot prove conclusively that people making claims have suffered an asbestos-related injury.

The giant insurance business, which could face bankruptcy unless it slows the rate of asbestos settlements in the US, warned last year that it would stop reimbursing claims if it thought money was going to 'unimpaired' claimants.

Equitas insured companies that made, used or transported asbestos. These companies are being sued not only by employees who have developed mesothelioma - the deadly asbestos-related cancer - but by others who cannot demonstrate they have suffered injury.

It is not uncommon in America for healthy people to sue an asbestos firm without having to prove they have an illness or that they worked for the company or went near its premises. These 'unimpaired' claimants are often bundled with genuine victims and US courts award group settlements.

But Equitas believes that the level of unimpaired claims - encouraged by lawyers who can earn anywhere between 25% and 50% of the final settlement - is overtaking the cost of genuine claims.

The latest British ruling by the Law Lords means that insurers will have to begin compensating victims, but only those who have been diagnosed with mesothelioma. Insurance industry experts now calculate that this will cost possibly half the £5bn to £8bn suggested by early estimates.

But ratings agency AM Best believes the bill for asbestos settlements in the US could top $65bn. A spokesman for Equitas said: 'The problem is that there is an infinite number who are not sick but who may still try to claim. The real risk in all this is that the industry will have no money left to pay genuine victims.'