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Asbestos Issues and Trends 2003 CARE Meeting, Philadelphia June 2, 2003 Michael E. Angelina, ACAS, MAAA Jennifer L. Biggs, FCAS, MAAA Tillinghast – Towers Perrin

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Asbestos Issues and Trends. 2003 CARE Meeting, Philadelphia June 2, 2003. Michael E. Angelina, ACAS, MAAA Jennifer L. Biggs, FCAS, MAAA Tillinghast – Towers Perrin. What is Asbestos?. - PowerPoint PPT Presentation

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Page 1: Asbestos Issues and Trends

Asbestos Issues and Trends2003 CARE Meeting, PhiladelphiaJune 2, 2003

Michael E. Angelina, ACAS, MAAAJennifer L. Biggs, FCAS, MAAATillinghast – Towers Perrin

Page 2: Asbestos Issues and Trends

2

What is Asbestos? Naturally occurring fibrous mineral with a crystalline

structure containing long chains of silicon and oxygen

Six types

“Miracle Mineral”

“Protector of Human Life” ironically thought to be the protector of people

flexible strong durable

fire resistant separable into

filaments abundant quantities

actinolite amosite anthophylite

crocidolite tremolite chrysotile

Page 3: Asbestos Issues and Trends

3

Asbestos Usage Peaked in the early 1970s Contained in ~3,500 products (1989 EPA study) Still legal in the U.S. today

Ban on asbestos promulgated by the EPA in 1989 was remanded by the U.S. Fifth Circuit Court of Appeals in 1991

Only a few portions of the ban remained intact: new product uses; rollboard; flooring felt; and commercial, corrugated, and specialty paper

No effective warning label requirements Not tracked effectively

Large manufacturers report annually to Toxic Release Inventory

No requirements for small manufacturers Imports (especially building materials)

Page 4: Asbestos Issues and Trends

4

Exposure and Disease Exposure

Early epidemiological studies estimated ~27 million workers experienced significant occupational exposure to asbestos

Recent forecasts of the Manville Trust suggest an exposed population in excess of 100 million

Ongoing exposure asbestos containing products asbestos in-place

Typical American breathes ~1 million fibers per year via natural and man-made sources

Disease Documented and recognized as cause of disease since 1920s

Pliny the Elder had noticed a significantly high number of lung related sicknesses in servants working with asbestos cloths and fibers

Pleural thickening, asbestosis, lung and other cancers, mesothelioma Long latency

Page 5: Asbestos Issues and Trends

5

Why So Much Litigation? Large percentage of population

exposed Signature diseases Potential for large jury awards Economies of scale for plaintiff

attorneys Insurance recoverables

Page 6: Asbestos Issues and Trends

6

The Asbestos Litigation Environment Has Changed Increasing costs to defendants...

Surge in claim filings Rescission of previous settlement agreements

between plaintiffs attorneys and defendants Bankruptcies

...and increasing costs to insurers and reinsurers Increased costs for existing defendants Additional costs for new defendants Additional coverage accessed

Page 7: Asbestos Issues and Trends

7

Claim Filings Appeared Fairly Stable in Early 1990s(T

hous

ands

)

0.0

10.0

20.0

30.0

40.0

50.0

1991 1992 1993 1994 1995

CCR 1 CCR 2 Non-CCR 1 Non-CCR 2

Page 8: Asbestos Issues and Trends

8

CCR Claim Filings Increased After Georgine’s Reversal

0.010.020.030.040.050.060.070.080.090.0

1991 1992 1993 1994 1995 1996 1997 1998 1999 2000

Avg CCR 1(91-95) CCR 1 Avg CCR 2(91-95) CCR 2

Page 9: Asbestos Issues and Trends

9

Non-CCR Claim Filings Also Increased

0.010.020.030.040.050.060.070.080.090.0

100.0

1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002

Avg 91-94 NonCCR 1 NonCCR 2

Page 10: Asbestos Issues and Trends

10

Surge in Personal Injury Claim Filings Causes

“catch up” for CCR defendants post Georgine greater propensity to sue

asbestos specialty firms, union hall screenings, Sunday sports page advertisements, Internet, doctors, new claims

acceleration of claim filings anticipation of tort reform; bankruptcy creditor

lists; statute of limitations Effects

Increased costs to all parties!! change in disease mix mitigates the increase continued ability to bundle claims will drive costs

Page 11: Asbestos Issues and Trends

11

Surge in Claim FilingsManville Trust - Injury by Year Filed

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

90,000

100,000

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002

Year Filed

Num

ber o

f Cla

ims

(Denied) or Unknow n

Non-Malignant

Cancer

Mesothelioma

Page 12: Asbestos Issues and Trends

12

Change in Disease Mix

Manville Trust - Injury by Year Filed

10%6% 5% 5% 5% 5%

13%

12%11%

7%9% 9%

6%

10%7% 8%

6% 6%

77%83%

89%85% 86%

91%84%

89% 87%91% 94%

90%

3%4% 4% 4% 3% 2% 4%4%

82%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002

Year Filed

Perc

ent o

f Cla

ims

File

d by

Cat

egor

y

Non-Malignant

Cancer

Mesothelioma

Page 13: Asbestos Issues and Trends

13

Increasing Numbers of Claimants Are Unimpaired

1982 4% of claims showed no manifest asbestos-related injury(RAND)

1993 Up to one-half of all asbestos claims have little or no physical impairment (Harvard Journal of Legislation)

1998 No evidence of disease in 57% of asbestos claims(Manville Trust)

2001

74% of pending claims are unimpaired(confidential report prepared for a defendant)

Two-thirds of claims show no evidence of impairment(Babcock & Wilcox)

Vast majority of claims provide no evidence of impairment(W.R. Grace)

Source: RAND

Page 14: Asbestos Issues and Trends

14

Percent of

filings in

federal courts

Other Trends in Claim Filing ActivitiesFilings Moved from Federal

to State Courts

0

10

20

30

40

50

Pre-1988 1988–1993 1994–1997 1998–2000

Source: RAND, January 2003

Page 15: Asbestos Issues and Trends

15

Other Trends in Claim Filing Activities

1970–1987 1988–1993 1994–1997 1998–2000

100

80

60

40

20

0

Percent

Other states

NY

OH

TX

MS

IL

WV

MD

NJ

PA

CA

Source: RAND, January 2003

…and from some states to others

Page 16: Asbestos Issues and Trends

16

Observations –Average Settlements by State

1 2 3 4 5 6 7 8 9 10 11 CWStates

$U.S

.

Page 17: Asbestos Issues and Trends

17

Observations – Disease Mix by State

1 2 3 4 5 6 7 8 9 10 11 CWStates

%

Mesothelioma Cancer Non-Malignant

Page 18: Asbestos Issues and Trends

18

Observations – Average Settlements by Disease

Countrywide State 1 State 2 State 3

Mesothelioma Lung Cancer Non Malignant

$U.S

.

Page 19: Asbestos Issues and Trends

19

Individual Claim Costs Also Increased Mean verdicts to plaintiffs increased

dramatically from 1998 to 2001 (RAND) Mesothelioma: ~$2M to ~$6.5M Other cancer: ~$1M to ~ $2.5M Asbestosis: ~$2.5M to ~$5M

Damages paid by many individual defendants also increased dramatically, reflecting increase in plaintiff awards higher shares for remaining defendants

Page 20: Asbestos Issues and Trends

20

Frictional Costs in the System are High

According to RAND, transaction costs have consumed more than half of total spending

And they are likely to go back up in next decade

Plaintiff Compensation

0

20

40

60

80

100

1980sLitigation

1990sLitigation

Percent Plaintiff Expenses

Defense Expenses

Page 21: Asbestos Issues and Trends

21

Bankruptcy of Defendants Currently at least 67 bankruptcies of companies with

asbestos-related problems according to testimony prepared by the American Academy of Actuaries (www.actuary.org)

Bankruptcy cited as “legislative solution” by Babcock & Wilcox

New bankruptcies may: Increase costs for remaining defendants

Several defendants cited higher settlement demands as a cause of bankruptcy

Cause need for additional defendants Approximately 300 asbestos defendants in early 1980s Estimates of ~2,000 published a few years ago RAND estimates over 8,400 today

Page 22: Asbestos Issues and Trends

22

Number of Asbestos Related Bankruptciesper Year

3

1 1 1

4

3

0

3 3

2 2

3

0

1 1

0

5

2

6

10

12

0

2

4

6

8

10

12

14

1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002

Num

ber

Note: Excludes two bankruptcies for which no date is available.

Page 23: Asbestos Issues and Trends

23

Expansion of Defendant List Defendant list continues to expand since asbestos was used

historically in a wide variety of products, including: yarn, thread, felt, rope packing, flame resistant cloth steam gaskets and packings, plain and corrugated paper, rollboard,

millboard, high temperature insulation, movie props World War II Ship Building molded brake linings, brake blocks, filler in plastics, flooring, pottery,

insulated wire, pipe covering brake shoes, clutch facings, cement, plaster, stucco, shingles, siding, tile,

sewer pipes, blocks corrugated roofing, roof sheathing, roofing cement boiler insulation; insulation of walls, floors, mattresses paints, varnishes, filter fibers, filter pads

According to RAND Study Firms in current list of defendants span 75 of 83 possible 2-digit SIC

codes/industries Over 60% of expenditures are now from non-traditional defendants

Page 24: Asbestos Issues and Trends

24

Costs through 2000 were substantial, but tell only part of the story According to RAND, estimated total costs of

resolving asbestos claims through 2000: $54 B U.S. insurers $22 B Insurers outside U.S. $8–$12 B Defendants $20–$24 B

At least 5 major companies have each spent more than $1 B on asbestos litigation

Source: RAND, January 2003

Page 25: Asbestos Issues and Trends

25

How to Quantify Asbestos Liabilities? Actuaries typically like to use past experience

to predict the future However, for asbestos we can’t use traditional

actuarial methods (e.g., accident year loss development projections) Long latency from exposure to disease

manifestation Potential involvement of multiple policy

periods for individual claims

Page 26: Asbestos Issues and Trends

26

How to Quantify Asbestos Liabilities? Many use benchmarks or rules of thumb

Market share techniques For example, 5% of GL premium volume for affected

years translates to 5% share of ultimate liabilities Survival ratio techniques

equals ratio of total reserves divided by average annual payments

U.S. net asbestos survival ratio was 8.8 (excluding Fibreboard) as of 12/31/2001

A.M. Best now using an undiscounted survival ratio of 18 - 20.

Aggregate development multiples of paid losses, case reserves, or reported losses

Comparisons to peer companies (e.g., significant reserve additions)

Page 27: Asbestos Issues and Trends

27

How to Quantify Asbestos Liabilities? Exposure-based modeling will improve

understanding of ultimate A&E liabilities For an insurer or reinsurer, it considers

Mix of insureds Types of coverage

Policy wording Attachment points and limits Years of coverage Claims handling and settlement activities

Greater understanding equips the defendant, insurer, or reinsurer to deal strategically with its exposure

Page 28: Asbestos Issues and Trends

28

Tillinghast – Towers Perrin Estimates of Ultimate Personal Injury Claim Costs Tillinghast estimates ultimate loss & expense

relating to U.S. exposure will be $200 billion Two approaches:

Focused on total awards to plaintiffs

Estimated # future filings by disease

Estimated indemnity cost and trended by disease

Loaded for expense

Top-Down Focused on amounts paid by defendants

Assigned defendants to tier

Estimated # future filings, indemnity, and expense by tier

Allocated ultimates to year and compared to insurance coverage

Bottom-Up

Page 29: Asbestos Issues and Trends

29

Estimation of Ultimate Loss and Expense –Top Down Estimate total awards to plaintiffs ~$200 billion

Estimate number of personal injury filings by disease by calendar year

Estimate average indemnity by disease Trend to future years

Multiply future filings by trended severities Load for expense

F = # Claims S = Avg. Indemnity

Year Meso LC NM Meso LC NMTotal Cost Incl.

Expense20002001200220032004...2010...2020...2030...2040...

Reflects exposure latency disease incidence, and propensity to sue

Trended (F X S)x (1 + expense)

~1 million ~$200 B

Page 30: Asbestos Issues and Trends

30

Estimation of Ultimate Personal Injury Claim Filings Tillinghast Projection of Asbestos Related Filings

2000

- 20

04

2005

- 20

09

2010

- 20

14

2015

- 20

19

2020

- 20

24

2025

- 20

29

2030

- 20

34

2035

- 20

39

2040

- 20

44

2045

- 20

49

Calendar Year

Num

ber o

f Fili

ngs

Meso Lung Cancer Non-Malignant

Page 31: Asbestos Issues and Trends

31

Estimation of Ultimate Loss and ExpenseTillinghast Projection of Asbestos Related Ultimate Losses

2000

- 20

04

2005

- 20

09

2010

- 20

14

2015

- 20

19

2020

- 20

24

2025

- 20

29

2030

- 20

34

2035

- 20

39

2040

- 20

44

2045

- 20

49

Filed Year

$ Ex

pect

ed L

oss

Meso Lung Cancer Non-Malignant

Page 32: Asbestos Issues and Trends

32

Estimation of Ultimate Loss and Expense – Bottom Up Estimate total cost to defendants ~$200 billion

Develop database of defendant experience Number of filings against defendants Average indemnity (defendant’s share) Expense-to-indemnity ratios

Resulting distributions vary by tier

The Types of Asbestos DefendantsTier 1: Manufacturer/producers in litigation

since inception Will use all available insurance

coverage

Tier 2: Became involved shortly after Tier 1companies Some will exhaust all insurance

coverage Others will not hit highest layers

due to smaller share of industry

Tier 3: Manufacturers, distributors andinstallers brought into litigation dueto Tier 1 and Tier 2 bankruptcies Lesser exposure due to

encapsulated products or limiteddistribution

Tier 4: Owned/operated facilities whereasbestos used and third partiesexposed on premises

Page 33: Asbestos Issues and Trends

33

Estimation of Ultimate Loss and Expense – Bottom Up

Project future filings for each defendant implies ~60 defendants per plaintiff case

Project future severities by defendant implies average ultimate severities of $1,873 to $5,550 – vary by

tier.

Project future expenses (defense costs) by defendant Implies average ultimate expense loads of 20% to 116% – vary

by tier. Reflects a reduction in expenses for Tier 3-Low defendants over

a five year period.

Ground-up ultimate loss and expense for each defendant= Filings x Trended Indemnity Severities x (1 + expense)

Allocate ground-up ultimate indemnity and expense to year Compare to average defendant coverage profiles

Page 34: Asbestos Issues and Trends

34

Estimation of Ultimate Loss and Expense – Bottom Up Determine percentage insured, by defendant

Allocate ground-up ultimate indemnity and expense to year Compare to average coverage profiles

Expense treatment varies by policy

Consider reinsurance cessions

Asbestos Insured XYZ's Coverage Chart

1930…

1978 1979 1980 1981 1982 1983 1984 1985 1986

Year

Cov

erag

e A

mou

nt $

Primary

Excess 1

Excess 2

Excess 3

Excess 4

Excess 5

----------------- Self - Insured --------------------

Page 35: Asbestos Issues and Trends

35

More Detailed Coverage Descriptionof Excess 1 Layer in 1980

0

2

4

6

8

1980

$ M

illio

ns

Excess 1 70% Insurer GHI

Excess 1 10% Insurer ABC

Excess 2

Excess 110%

InsurerABC

Excess 120%

InsurerDEF

Excess 170%

InsurerGHI

Primary - Insurer JKL

Page 36: Asbestos Issues and Trends

36

Comparison of Loss Allocated to 1980to Available Coverage of Insurer ABC For example, if Insurer ABC wrote 10% of $5

million xs of $1 million in 1980, and ultimate losses allocated to 1980 totaled $1,000,000, then Insurer ABC’s gross liability

would be $0 $4,000,000, then Insurer ABC’s gross liability

would be $300,000 (= 10% x ($4,000,000 – $1,000,000))

$6 million, then Insurer ABC’s gross liability would exhaust its limit of $500,000

Page 37: Asbestos Issues and Trends

37

Coverage Expansion Roll-forward of coverage blocks Reclassification of products claims as non-

products claims by traditional products defendants with installation activities with exhausted (or nearly exhausted) products coverages reinstates previously exhausted products

coverages opens up previously “untapped” non-products

coverages non-products coverages may not have

aggregate limits

Page 38: Asbestos Issues and Trends

38

Allocate Ultimate Loss and ExpenseAmong Multiple Payers

Defendant Cost

Retained

Insured

Direct – U.S.

Retained – U.S. Ceded

U.S. London Other U.S. London Other

Direct – London

Retained – London Ceded

Page 39: Asbestos Issues and Trends

39

Portion of $200 billion Ultimate Loss and Expense – Retained, Net Insured U.S., Net Non-U.S.**

Net U.S. Insured30%*

Retained by

Defendants39%

Net Non-U.S.

Insured31%

*$60 billion mid-point of $55 – $65 billion range of the “Universe” of net liabilities to the U.S. P/C market.**Additional details available in Emphasis 2001/3, “Sizing Up Asbestos Exposure,” a publication of Tillinghast – Towers Perrin, at www.towers.com.

Page 40: Asbestos Issues and Trends

40

Paid and Reported Loss and Expense Compared to Estimates of Net U.S. Ultimate Liability

0

10

20

30

40

50

60

70

1994 1995 1996 1997 1998 1999 2000 2001

$ B

illio

ns

0

10

20

30

40

50

60

70

Tillinghast 12/1996 Ultimate ($38-43 billion) Tillinghast 2001 Ultimate ($55-65 billion)

A.M. Best 1997 Ultimate ($40 billion) A.M. Best 2001 Ultimate ($65 billion)

Cumulative Paid ($23.5 billion) Outstanding Case & IBNR ($13.0 billion)

Page 41: Asbestos Issues and Trends

41

Recent Insurer Disclosures There were several sizeable reserve increases

during 2001-2002: CNA – $1 billion pre-tax per A.M. Best; $750

million after tax (August 3, 2001) ECRA – $1 billion pre-tax estimated by A.M.

Best (February 2002) The Hartford – Reallocation of $540 million

“all other” run-off reserves to asbestos (July 2002)

Chubb – $590 million by December 31, 2002 St. Paul – $987.5 million settlement with

Western MacArthur

Page 42: Asbestos Issues and Trends

42

Recent Insurer Disclosures And the trend continues in 2003:

Travelers increased net asbestos reserves by $2.45 billion (January 14, 2003) disclosed major results of the study (policyholders

with settlements, other policyholders, assumed reinsurance, unallocated IBNR)

ACE USA increased A&E reserves (January 27, 2003) $2.18 billion gross $1.86 billion reinsurance recoverable $354 million after-tax charge

Argonaut increased asbestos reserves by $52.8 million (March 2003)

The Hartford has announced an exposure-based study to be completed later this year

Page 43: Asbestos Issues and Trends

43

Recent Insurer Disclosures Some have made statements of adequacy

CNA AIG Allstate

Increased pressure on peer companies to make similar disclosures

Page 44: Asbestos Issues and Trends

44

Recent Increases in Recognized LiabilitiesAnd around the world: Chester Street

placed in provisional liquidation (January 2001) entered a “Scheme of Arrangement”

(March 5, 2001) Equitas

£1.5 billion as initially undisclosed portion of total strengthening as of March 31, 2000

£1.7 billion ($2.4 million) as of March 31, 2001 (announced July 2001)

No change as of March 31, 2002 (announced July 2002) Royal & Sun Alliance – $538 million for U.S. and U.K.

(February 2002) U.S. pre-tax charge of $241 million estimated by A.M. Best

Page 45: Asbestos Issues and Trends

45

And the costs extend beyond personal injury claims costs paid by defendants and their insurers... “The Impact of Asbestos Liabilities on Workers in Bankrupt

Firms” by Joseph E. Stiglitz, Jonathan M. Orszag, Detr R. Orszag – December 2002 Bankruptcies across the nation

headquarters in 19 states facilities in 47 states

Pre-bankruptcy, 200,000 workers employed by bankrupt firms Loss of 52,000 – 60,000 jobs with each displaced worker

losing an average of $25,000 – $50,000 in wages Average 25% reduction to their 401(K) account (approx.

$8,300 each) Direct cost of bankruptcy: $850M – $1.7B

NERA – $2 Billion Secondary Impacts on the Economy

Page 46: Asbestos Issues and Trends

46

Where Do We Go From Here?Recent Changes in Claims Handling Asbestos claims handled differently than other torts

volume/docket pressure bundling

Center for Claims Resolution (CCR) changes its procedures abandons practice of routinely settling cases on a

group basis and requiring members to share settlement costs (February 2001)

stops settling new asbestos claims for remaining 14 members effective August 1, 2001; in run-off

Equitas leads London insurers, requiring evidence of injury and product identification effective June 1, 2001

Page 47: Asbestos Issues and Trends

47

The Coalition for Asbestos Justice Formed in 2000 as a nonprofit association to address and

improve the asbestos litigation environment Currently has eleven members: Ace, Argonaut, Chubb,

CNA, Everest Re, Fireman’s Fund, General Re, Great American, The Hartford, Liberty Mutual, and St. Paul

Mission: To encourage fair and prompt compensation to deserving current and future asbestos litigants by seeking to reduce or eliminate the abuses and inequities that exist under the current civil justice system

Coalition is not involved with insurance coverage issues Working to effect change through public education

(including the judiciary), amicus briefs, and jurisdictional litigation efforts

Page 48: Asbestos Issues and Trends

48

Public Education A primary mission of the Coalition is to foster a better

understanding of the current asbestos litigation environment Research and Studies (e.g., RAND Study update

(www.rand.org)) Academic Scholarship

Victor E. Schwartz & Leah Lorber, “A Letter to the Nation’s Trial Judges: How the Focus on Efficiency Is Hurting You and Innocent Victims in Asbestos Liability Cases” 24 Am. J. Trial Advoc. 247 (2000)

Mark D. Plevin & Paul Kalish, “Where Are They Now? A History of the Companies That Have Sought Bankruptcy Protection Due to Asbestos Claims” Vol. 1, No. 1 Mealey’s Asbestos Bankr. Rep., Aug. 2001

“This is NOT your father’s asbestos defendant”

Page 49: Asbestos Issues and Trends

49

Jurisdictional Litigation Efforts Identifying jurisdictions that pose the biggest

challenges for asbestos defendants and truly sick claimants Key states: CA, IL, LA, MD, MA, MS, NJ, NY, PA,

TX, WV Meeting with counsel from these states to

understand the current case management orders and identifying other due process issues

Advancing inactive dockets / pleural registries Challenging consolidations and joinder rules

Page 50: Asbestos Issues and Trends

50

Changes in the Wind? There are a few signs in the asbestos litigation environment that

business may not be as usual A split in the asbestos plaintiff’s bar between those representing

“real” cases versus those representing the non-impaired House of Delegates of the American Bar Association (ABA) voted

on February 11, 2003 to support legislation that would establish specific medical

criteria that must be satisfied by those alleging non-malignant asbestos-related disease in order to file an asbestos lawsuit

proposal would also toll statute of limitations until such time as the medical criteria were met

Judge Weiner’s ruling in the Federal MDL dismissing all cases that were initiated through mass screenings

Hearing held by Judges Weinstein and Lifland in the Johns Manville bankruptcy proceeding

Page 51: Asbestos Issues and Trends

51

Changes in the Wind? There are a few signs in the asbestos litigation

environment that business may not be as usual West Virginia passes SB 213 limiting the ability of

non-resident plaintiffs to maintain causes of action Mississippi passes HB 19 limiting punitive awards,

reduces venue shopping, releases “innocent seller” (January 2003)

Pennsylvania Asbestos Legislation (SB 216) dealing with asbestos-related liabilities acquired via merger or consolidation

Many more articles in the business press and from investment analysts advocating the need for an asbestos solution

Page 52: Asbestos Issues and Trends

52

U.S. Supreme Court Actions Amchem v. Windsor

Overturned Georgine/CCR Futures Deal (June 27, 1997)

Ortiz v. Fibreboard Overturned second global settlement attempt (1999)

Mobil Corp. v. Adkins Refused to hear case regarding consolidation of case

involving 8,000 plaintiffs from 35 states and 250 defendants in West Virginia

Exxon settled October 2002, leaving Union Carbide/Dow Chemical Company as the sole remaining defendant

Page 53: Asbestos Issues and Trends

53

U.S. Supreme Court Actions Hopeman Brothers Inc. v. Clarence L. Acker Jr., et.

al. Denied petition to review mass consolidation of

cases in Virginia (December 9, 2002) Norfolk & Western Railway Co. v. Ayers, et. al.

(March 10, 2003) Fear of developing cancer justifies a claim under

FELA Joint & several liability: entire damages can be

recovered from the railroad Six workers with asbestosis obtained $5.8 million

Page 54: Asbestos Issues and Trends

54

Possible Federal Legislation The Fairness in Compensation Act (H.R. 1283/S758) did

not advance would have established the Asbestos Resolution Corp. opposed by President Clinton and the plaintiff’s bar

Likely prospective proposals supported by the Asbestos Alliance (led by the American Insurance Association and the National Association of Manufacturers) will focus legislation on four areas establishing objective medical criteria of asbestos-

related impairment liberalizing statues of limitations eliminating consolidations eliminating forum shopping

Page 55: Asbestos Issues and Trends

55

Possible Federal Legislation S413 – Senator Nickles

Cases remain in court system Establish medical criteria Toll applicable statutes of limitation until medical

criteria are met Senate Hearings

September 25, 2002 and March 5, 2003 Discussion of medical criteria as well as an

asbestos trust fund Senator Hatch has called for a compromise

solution by the end of March 2003

Page 56: Asbestos Issues and Trends

56

Quotes from Clients and Colleagues “The claims are continuing.” “We have more open accounts today then we did ten years ago. We’re seeing more

claims against Main Street America – distributions, hardware, HVAC.” “Claim filings have remained steady; we expected a decrease by now.” “Asbestos is the energizer bunny of toxic torts; it keeps going and going and

going...” “We are seeing operations claims from new defendants (contractors, distributors)” We’ve been approached by producers seeking finite cover. The cover might be a

positive influence on financial analyst opinions … The defendants must anticipate that filings will continue … A small number of deals are being done.”

“I expect to see at least five more bankruptcies of asbestos defendants in the next 12 to 18 months.” (This seemed to be a bold statement in September 2000; little did we know what was to come …)

“…endless search for a solvent bystander…” “Asbestos litigation is a profit-driven industry.” “Don’t think of them as lawyers, think of them as venture capitalists.” “… factories (be they lawyers) generating paper … Here’s the form, fill in the blanks

… won’t end by when I die, even when my kids die …”

Page 57: Asbestos Issues and Trends

57

Current Status Recap Significant deterioration in liabilities at all levels

Defendants, insurers, and reinsurers Generated by filing activities

Mitigated by shift in disease mix to claims with lower settlement values

Continue to see more bankruptcies or finite deals May see increased attention to what the

defendants are carrying on their balance sheets Current focus has been from financial analysts,

not auditors More scrutiny from insurance regulators

Page 58: Asbestos Issues and Trends

58

Current Status Recap (cont’d) More than 25 years after peak usage, we still

see significant activity on the claims side It’s the “Energizer Bunny” of toxic torts

It just keeps going and going and going ...

Page 59: Asbestos Issues and Trends

59

Michael E. AngelinaMr. Angelina is a co-author of Tillinghast’s study regarding the asbestos “universe,” first presented on May 30, 2001 to the RAA Education Conference and the Casualty Actuaries of the Mid-Atlantic Region (CAMAR). He is a consulting actuary with Tillinghast – Towers Perrin in its Philadelphia office. He is a principal of the firm.

Mr. Angelina is a member of Tillinghast’s asbestos and environmental practice area, and currently coordinates research and development activities relating to the contingent liabilities of corporate asbestos defendants assisting clients with asbestos-related operational strategies. He has quantified reserve needs for asbestos, pollution, and other health hazards (APH) for both domestic and international insurers and reinsurers. He has also written for Emphasis on asbestos issues, and has participated on various industry forums, trade press, and meetings regarding asbestos liabilities. Mr. Angelina is also active in the firm’s placement initiative for these types of exposures.

Prior to rejoining Tillinghast in January 2000, Mr. Angelina was Vice President and Actuary with Reliance Reinsurance Corp. (RRC). He also served as the Actuarial Officer of the Finite Risk unit. His responsibilities in the financial actuarial role included: modeling outwards reinsurance transactions, providing actuarial support and guidance for areas which had problematic implications to RRC’s financial results, and identifying new opportunities for growth. In the Finite Risk unit, Mr. Angelina’s responsibilities included: performing actuarial and underwriting analyses of loss portfolio transfers; developing the financial structure of potential deals; and performing due diligence reviews of target books of business.

Incorporating his 11 years at Tillinghast prior to rejoining the firm, Mr. Angelina has been involved in a number of client assignments including: ratemaking for personal automobile business; reserve reviews for insurers, reinsurers, excess and surplus carriers, and self insured entities; valuations of insurance operations in support of mergers and acquisitions; financial modeling; quantification of asbestos and pollution liabilities; and the development of pricing systems and size of loss distributions for multinational excess insurance coverages. He is a developer of RPIL, Tillinghast’s excess of loss pricing system, and part of the Global Loss Distributions (GLD) initiative.

Mr. Angelina is a frequent speaker at the Casualty Actuarial Society seminars on pricing and reserving for US and international exposures and has written on risk financing costs for Captive Insurance Company Reports, as well as asbestos-related issues. Prior to joining Tillinghast in 1988, Mr. Angelina worked for CIGNA in the workers compensation and the actuarial research units.

Mr. Angelina is an associate of the Casualty Actuarial Society and a Member of the American Academy ofActuaries. Mr. Angelina is a graduate of Drexel University with a B.S. degree in Mathematics.

[email protected](215) 656-2345

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Jennifer L. BiggsMs. Biggs is a co-author of Tillinghast’s study regarding the asbestos “universe,” first presented on May 30, 2001 to the RAA Education Conference and the Casualty Actuaries of the Mid-Atlantic Region (CAMAR). She is a consulting actuary with Tillinghast – Towers Perrin in its St. Louis office. She is a principal of the firm.

Ms. Biggs is a member of Tillinghast’s asbestos and environmental practice area. She coordinates research and development activities relating to asbestos and has quantified reserve needs for asbestos, pollution, and breast implant liabilities for insurance and reinsurance companies. Ms. Biggs has also been active in the firm’s asbestos and environmental reinsurance placement initiative.

Ms. Biggs has spoken at Annual Meetings of the Casualty Actuaries in Reinsurance and the Casualty Actuarial Society regarding asbestos liabilities. Under her direction as Chairperson of the American Academy of Actuaries Mass Tort Work Group a Public Policy Monograph: Overview of Asbestos Issues and Trends was released in December 2001.

Ms. Biggs also has significant experience in the professional liability area. Her work includes analyses of funding requirements, self-insured retention limits, and allocation systems for self-insured trust funds of several hospitals. She also performs reserve evaluations, opining on year-end statutory reserve levels for physician insurers. Additionally, she has assisted insurers by analyzing rate levels and preparing filing materials for entry into new states.

Prior to relocating to Tillinghast’s St. Louis office in 1988, Ms. Biggs spent almost four years in Tillinghast’s Bermuda office. There she gained considerable experience in financial reinsurance, performing pricing analyses for loss portfolio transfers. Most other assignments were related to loss reserving for reinsurance and captive insurance companies.

Ms. Biggs is a Fellow of the Casualty Actuarial Society and a Member of the American Academy of Actuaries. Ms. Biggs graduated with college honors from Washington University in St. Louis with a B.A. in mathematics and a business minor.

[email protected](314) 719-5843