Equitas settles biggest asbestos liability

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Equitas settles biggest asbestos liability
Equitas has slashed its asbestos lia-        adding that Equitas was ‘willing to           better placed than many to reach such
bilities by more than half a billion dol-    have similar discussions with any of          settlements, simply because its size
lars through a one-off settlement with       our policyholders, large or small, so         makes it a more viable party to deal
US energy and engineering group              long as they are sincerely interested in      with. In addition, the fact that Equitas
Halliburton. The $575 million deal was       reaching a realistic settlement.’             has finite resources may encourage
announced at the end of January and             Equitas will make two payments to          some defendants to settle sooner rather
caps by far the largest single direct lia-   Halliburton, one of $500 million and          than later.
bility faced by Equitas.                     the other of $75 million 18 months               Asbestos is expected to cost insurers
   Simon Wright, head of asbestos pol-       later. The timing of the payments             worldwide $120 billion, making it the
lution and health hazard claims,             depends on bankruptcy proceedings at          biggest single source of loss to the
described the deal as another example        Halliburton subsidiaries and affiliates.      industry. Last year, US insurers added
of ‘Equitas’s commitment to resolving        The settlement is also conditional on         around $10 billion to asbestos reserves,
claims with all Lloyd’s policyholders as     there being no US federal asbestos            as claims continued to pile up. In par-
expeditiously as is reasonably possible      reform legislation passed in the current      ticular, claims from large US companies
and at fair values.’ In a joint statement    Congress.                                     with asbestos liabilities are now going
with Equitas, Halliburton said: ‘We             Insurers other than Equitas are set-       to higher layers and later years of cover,
hope other insurers will respond in a        tling some of their asbestos liabilities      observes Michaels, and many of these
similar manner.’                             too, but few deals are publicised.            could flow through in part to the
   The settlement means that Equitas,        However,      Darren       Michaels   of      London market.
which was created in 1996 to run off         Tillinghast points out that Equitas is                                 John Sanders
Lloyd’s pre-1992 liabilities, has now
resolved five of its ten biggest asbestos      The Halliburton settlement will resolve all asbestos-related claims made
exposures. Last April, it reached a $472       against Lloyd’s underwriters by Halliburton and by each of Halliburton’s
million settlement on asbestos with            subsidiary and affiliated companies, including DII Industries, Kellogg Brown &
Honeywell International Inc.                   Root and others that have filed Chapter 11 bankruptcy proceedings as part of
   Claims director Glenn Brace said            Halliburton’s global asbestos settlement. Halliburton’s claims against its
these agreements involved tough nego-          London market company insurers are not affected by this settlement.
tiations with sophisticated businesses,

Early closure for Kwelm
Creditors of the insolvent Kwelm             reinsurance collected, the realisation of     distribute the bulk of the assets to the
companies have voted for an early clo-       remaining assets and the value of total       creditors far earlier than under the
sure of the run-off. The proposals were      liabilities and costs incurred in the final   original scheme.’
approved in a series of meetings held in     stages of run-off.                               Creditors can now expect to receive
London on 29 January.                           Following approval of the scheme by        total payments ranging between 58 per
   This means the creditors will receive     the courts, the scheme administrators         cent and 76 per cent of sums due, com-
the bulk of the $1.3 billion held for dis-   expect it to become effective in early        pared to average distributions of 46 per
tribution much earlier than under the        April. Under the scheme, creditors must       cent to date. The potential payout is
original scheme. The early closure pro-      submit details of any outstanding claims      substantially higher than envisaged
gramme should see payment of a sub-          and supporting evidence by a bar date,        when the original scheme was put in
stantive closure distribution to creditors   which is expected to be 29 September          place in 1993.
late in 2005 or early 2006, subject to       2004. Creditors will be able to lodge            The Kwelm companies are sub-
the level and complexity of further          claims through the Kwelm website              sidiaries of the failed London United
claims received. The original timescale      www.kwelm.com from mid-April.                 Investments plc. Total funds recovered
outlined for the run-off extended               Scheme administrators Chris Hughes         for distribution to creditors now exceed
beyond 2015.                                 and Ian Bond say: ‘Establishing a bar         $3.1 billion with total ultimate liabili-
   The proposals also foresee a small        date for submitting claims starts a           ties estimated at $5.8 billion, including
ultimate distribution some years later,      process to provide certainty as to the        a $1.2 billion special margin. The tenth
the size of which would depend on the        value of outstanding and contingent           annual report to creditors will be made
final level of set-off, the amount of        claims. As a result, we will be able to       available in May 2004.

issue eight • spring 2004                                                                                       run off business        5

     Benchmarking for asbestos litigation
     A tool that enables companies facing           Pace, a unit of Navigant Consulting,     Services (NCIRIS), was set up under
     asbestos claims to measure the qualita-      provides outsourced asbestos claims        senior management consultant Garred
     tive success of their litigation strategy    management and analytical services to      Clements to provide a range of spe-
     and performance has been developed by        asbestos defendants and their insurers.    cialist services. Then in November
     Navigant Consulting Inc’s Pace unit. The     q Navigant Consulting (UK) Limited         Navigant Consulting brought in Colin
     Asbestos Benchmarking Tool provides          has moved to new premises at               Smith and Gary Izatt to establish a
     analysis and reporting functions that        Lombard Street, London EC3. The            new FSA compliance assessment and
     deliver a comparative evaluation of the      company recently established two new       support service offering branded
     claims settled by subscribing companies,     business units in London and required      FRAMe.
     measured against industry averages.          additional space to accommodate              The new contact details are: 4th
        Navigant says more than two million       expanding staff numbers.                   Floor, 33 Lombard Street, London,
     claims and more than $1.7 billion in           In August last year a new division,      EC3V 9BQ, UK. Tel: +44 (0)20 7469
     settlements are included within the an-      Navigant Consulting ReInsurance            1111. Fax: +44 (0)20 7469 1112.
     alysis, allowing the subscribers to assess
     their settlement experience against
     other defendants. Settlement data is
     available for comparison by plaintiff
                                                  Xchanging buys Rebus
     law firm, jurisdiction and disease.          Technology provider RebusIS has            allows us to take advantage of the
        ‘Asbestos claim defendants are faced      been acquired by outsourcing specialist    changing dynamics of the global insur-
     with the growing needs of measuring          Xchanging. The announcement came           ance market and further enhance the
     their asbestos litigation performance,       after months of speculation about a        service we provide to our clients.’
     modifying their approach based on            possible takeover of Rebus. The com-          Robert Gogel, chief executive of
     their experience and communicating           bined group will have revenues of $360     RebusIS says: ‘Being part of a larger
     findings to internal management to dis-      million and will employ 1800 people        group will further enhance existing
     cuss new strategies,’ says Brad Drew, a      worldwide. General Atlantic Partners, a    client service and allow for increased
     director in Navigant Consulting’s prod-      private equity firm, was a significant     spending and the development of the
     uct liability practice. ‘Our Asbestos        shareholder in RebusIS and is a major      current product portfolio. Our employ-
     Benchmarking Tool enables companies          shareholder in Xchanging.                  ees will benefit from expanded oppor-
     to accomplish these crucial tasks               ‘RebusIS, which returned to profit      tunities within Xchanging.’
     through detailed reports that feature        last year, will form a separate business   q Xchanging says more than 300 peo-

     exceptional access to industry informa-      unit within the Xchanging Group            ple visited its Open Day for the London
     tion, including comparative data for         under the continued leadership of          Market held at the end of January.
     settlement amounts and volume of             Robert Gogel and his executive team,’      Products on display included Xchang-
     claim dismissals. This information can       says Richard Houghton, finance direc-      ing’s Integrated Claims Handling ser-
     then be used to address immediate            tor of Xchanging. ‘RebusIS’s technol-      vice, the Enhanced Claims Review ser-
     needs, including understanding historic      ogy product and service offerings cou-     vice for the Lloyd’s market, and the
     performance in relation to peer defen-       pled with their international presence     free-to-access Knowledge Base.
     dants or establishing appropriate settle-
     ment authorities.’
        The Asbestos Benchmarking Tool is         Litigation Control becomes LCL Group
     available on a subscription basis.
     Subscribing companies provide infor-         The Litigation Control Group has           will retain their existing identities.
     mation about their claims on a confi-        renamed itself as the LCL Group               Philip Holden, a director of the LCL
     dential basis, which is compared to the      Limited. At the same time one of the       Group, says: ‘These changes reflect the
     data compiled for all other subscribing      group’s constituent companies, Liti-       development and expansion of the ser-
     companies. While the reports allow a         gation Control Limited, now trades as      vices provided by the group companies
     company to review its own data in            LCL Insurance Services Limited.            since their formation and also strength-
     detail, all other data is aggregated in         Other companies within the LCL          en the LCL brand and profile in the
     order to maintain confidentiality.           Group – LCL Consulting, LCL Consul-        marketplace.’ The LCL Group’s services
     Reports are distributed semi-annually,       ting (Bermuda), LCL Loss Adjusting,        include claims and run-off manage-
     and additional reports can be requested      LCL Commercial Services, LCL               ment, debt recovery, reinsurance
     on an ad hoc basis.                          Collections and Claims Control Ltd –       recovery and commutations.

6    run off business                                                                                          issue eight • spring 2004
    news                                                                                       events
                                                                                               25-26 March
                                                                                               Essential Financial Skills for
                                                                                               Insurance Professionals
                                                                                               Thistle Marble Arch Hotel, London

     Asbestos, home and away                                                                   Contact: www.hawksmere.co.uk

                                                                                               14-17 April
                                                                                               Insurance Insolvency and
     Two different aspects of the impact         producer James Hardie Industries to           Reinsurance Roundtable
     of asbestos were discussed at the Assoc-    ring-fence itself from asbestos liabilities   Scottsdale, Arizona
                                                                                               Contact: www.mealeys.com
     iation of Run-off Companies (ARC)’s         (for more on this see Keith Rayment’s
     lunchtime talk in February. Keith Ray-      article in Run Off Business, winter 2003).    20 April
     ment, managing director of Axiom               In total, the Australian national com-     Regulation of Run-offs and
                                                                                               Employment Law Considerations,
     Consulting, described the extent of         pensation bill for asbestos-related           lunchtime seminar
     asbestos usage in Australia and the         claims is estimated at Aus$6 billion but      London
                                                                                               Contact: seminars@clyde.co.uk
     resulting claims experience, while Dr       that figure is currently being revised
     Jeremy Steele, consultant oncologist at     upwards.                                      7-9 June
     St Bartholomew’s Hospital, London              Turning to the UK, Dr Steele said the      8th Cavell Commutations
     spoke about the treatment of and            number of deaths here per annum               Norwich
     research into asbestos-related cancers      from mesothelioma was expected to             Contact:
     in the UK.                                  rise from 2000 in 2003 to around 3000
        Rayment said Australia was signifi-      in ten years’ time. When tracked on a         16-18 June
     cant because of the extensive use of        graph the pattern of mesothelioma             Insurance Exit Strategies
     asbestos there; it has had more             incidence closely mirrors the pattern of      Contact: www.ef-international.co.uk
     mesothelioma cases per capita than          asbestos imports into the UK with a
                                                                                               17 June
     anywhere in the world. Asbestos was         time lag of about 40 years. While the
                                                                                               Commutations and Recoveries,
     mined in Australia and it exported blue     bulk of victims worked with asbestos,         lunchtime seminar
     asbestos to the US. The number of           almost everyone over the age of 30 has        London
                                                                                               Contact: seminars@clyde.co.uk
     claims filed in Australia is as yet         had some asbestos exposure.
     nowhere near that seen in the US, but          Steele said mesothelioma was still         21-22 June
                                                                                               Reinsurance Claims and Collections
     it is rising steadily.                      ‘almost a taboo disease’. But while
                                                                                               New York
        Asbestos use in Australia was wide-      there was no cure it was possible to          Contact: www.americanconference.com
     spread and continued for longer than        offer treatment that allowed some
                                                                                               5-7 July
     in the US, explained Rayment. It was        patients to lead relatively full lives,       Run-Off Skills Course
     enthusiastically deployed in domestic       albeit for a relatively short time. He        West Lodge Park, Hadley Wood, London
                                                                                               Contact: ARC Academy, www.aroc.org.uk
     homes – an estimated one in three           bemoaned the fact that the UK govern-
     houses contains it, including some          ment, unlike the US, contributed very         11-17 September
     ‘fibre houses’ where walls and ceilings     little to cancer research which is almost     Monte Carlo Rendez-Vous
                                                                                               Monte Carlo
     were made of asbestos. These cases are      entirely funded by charities. The UK          Contact: www.rvs-monte-carlo.com
     likely to give rise to a new wave of        had set up the National Cancer
                                                                                               20-23 September
     claimants arising from the ‘do-it-your-     Research Institute along the lines of the
                                                                                               Xchanging London Market
     self’ activities of homeowners and may      US National Cancer Institute, but in          Conference
     also involve their families.                practice the UK institute had very little     Grand Hotel, Brighton
                                                                                               Contact: jason.shirley@xchanging.com
        ‘The problem in Australia won’t peak     money compared with the federally
     until 2030,’ warned Rayment, adding         funded US body.                               6-8 October
                                                                                               18th International Reinsurance
     that Australia was seeing a higher inci-       In particular, there had been little
                                                                                               Congress and Cavell Rendez-Vous
     dence of mesothelioma and serious           research done in the UK into asbestos-        Bermuda
     cancers among claimants than has been       related cancer, despite its importance to     Contact: www.hawksmere.com

     the case in the US (where many              cancer research in general, and the first     21 October
     claimants are unimpaired); Australian       UK trial of chemotherapy for mesothe-         ARC Members’ Run-Off Dinner
                                                                                               Plaisterers Hall, London
     courts have been fast-tracking claims       lioma began only two years ago. Steele
                                                                                               Contact: Leslie-Ann Giovnilli
     from sick claimants.                        also said the insurance industry did not      lesliea@ams-limited.co.uk
        Questions about the liability of state   provide any funding for asbestos-relat-
                                                                                               4 November
     and federal governments regarding           ed cancer research and an approach to         Insurance Broker Insolvency: exit
     enforcement of health and safety regu-      the ABI on behalf of the Mesothelioma         options and opportunities,
                                                                                               lunchtime seminar
     lations are now being tested in the         Research Fund had been unsuccessful.
     courts. Other complicating factors con-                                                   Contact: seminars@clyde.co.uk
     cerning who pays include the extensive      For further information on the Bart’s
     asbestos liabilities of the failed HIH      Mesothelioma Research Fund contact:
     Insurance and the efforts of asbestos       jeremy.steele@bartsandthelondon.nhs.uk

8    run off business                                                                                            issue eight • spring 2004