IT WAS AN all-too-familiar announcement. Last month ACE Ltd.said it would kick up its loss reserves for asbestos and otherenvironmental claims by $788 million. According to a Morgan Stanleyanalyst quoted in the Wall Street Journal, ACE's move was a signalthat other carriers also would "be forced to top off" reserves forsuch claims.

I'm sure the analyst was right. For years now, insurers havebeen steadily adding to reserves in the so-far forlorn hope ofcatching up to their seemingly limitless potential liability forasbestos-despite the facts that the mineral has long been absentfrom most workplaces and that CGL policies haven't covered theexposure since the mid-1980s. While mesothelioma, the cancer thatcan result from prolonged exposure to asbestos, is all too real andcertainly deserving of compensation, employers and their insurershave pointed out that a high percentage of the billions alreadypaid out in asbestos claims have gone to people who have mild oreven no symptoms. Indeed, plaintiff's attorneys have been known toconduct mass X-ray screenings in search of workers whose lungs mayshow evidence of scarring, regardless of whether they currently arein good health. Meanwhile, the genuinely ill sometimes have beenleft in the lurch.

A couple of years ago, an article in the Wall Street Journalnoted that more than 200,000 asbestos claims were pending and thatthousands more were being filed at triple the rate of prior years.Today, according to information posted at a Web site for awholesale-distributor association, the number is up to 600,000. Websites for the Risk & Insurance Management Society and TheNational Association of Mutual Insurance Cos. put the figure atmore than 700,000 claims. The American Insurance Associationrecently said it topped 730,000. Whatever the precise count, Ithink it's safe to say it signifies an enormous and expandingproblem. No wonder insurers have been clamoring for Congress to puta lid on it.

In the new Congress, that effort has been taken up by Sen. ArlenSpecter (R-Pa.), chairman of the Senate Judiciary Committee. Lastmonth, the committee held a hearing on a draft of the proposedFairness in Asbestos Insurance Resolution Act of 2005. Sen. Specterwas expected to introduce the actual bill before the end of themonth. It would reprise from 2003 and 2004 incarnations of thelegislation the idea of replacing the tort-based approach todealing with asbestos claims with a national trust fund that wouldcompensate victims meeting certain medical criteria on a no-faultbasis.

When the idea was first proposed, the size of the trust fund,which would largely be funded by asbestos-related businesses andtheir insurers, was put at $108 billion. Today, Sen. Specterproposes that the fund's size should be set at $140 billion, whichis still about $9 billion shy of where labor representatives wouldlike it to be.

From insurers' point of view, the problem with the fund, morethan just its stunning size, is that it might not actually put anend to the asbestos-litigation mess. Testifying at the SenateJudiciary Committee hearing, Craig Berrington, general counsel forthe American Insurance Association, noted that drafts he hadreviewed, far from creating one national solution to asbestosclaims, would allow them in certain circumstances to revert back tostate courts.

"The last thing that a national trust fund should do is to allowasbestos litigation to continue after the bill is signed into law,or be construed in a way that ever allows a return to the samelitigation system that has created the problem in the first place,"Berrington said.

He also complained that it was impossible to fix insurers' costunder the draft. He said the $46 billion contribution envisionedfor insurers in S. 2290 (last year's version of theasbestos-litigation reform bill) "represents the maximum, not afloor." He also said the draft did not take into account the amountcarriers had paid for claims since S. 2290 was originally proposed.Nor was Berrington thrilled with the fact that the draft would callfor insurers to accelerate their payments to the fund, "effectivelyincreasing insurer funding obligations." On top of all that, heexpressed concern that the trust fund in some ways appeared to be"made to fail," which could leave "insurers in the position ofhaving paid tens of billions into the trust fund, while stillfacing the prospect of decades of additional litigation should thetrust fund go out of existence."

The Independent Insurance Agents & Brokers of America, whileapplauding Sen. Specter for his interest in resolving the asbestosissue, also voiced support for insurers' position. "It is veryimportant that the funding proposal be fair and explicitly stated,"said Charles E. Symington Jr., IIABA's senior vice president offederal government affairs, "so that insurers do not risk being onthe hook for more money than was envisioned all along."

The Big 'I' and other producer organizations are right to beconcerned about this matter. As the association previously hasnoted, independent agents and brokers have an important stake inseeing the asbestos-litigation problem resolved. It affects thecost and capacity for myriad insurance products and calls intoquestion the financial stability and long-term prospects of anumber of major carriers they do business with.

Unless Sen. Specter's bill turns out to be significantlydifferent from the draft, however, the odds for insurance industrysupport and eventual passage do not look promising. Above all,insurers want finality-a day they can stop "topping off" theirasbestos loss reserves and say, for that exposure at least, they'vefinally plugged an endless drain on their capital. Then they canmove on to another one. Maybe mold.