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

I'm sure the analyst was right. For years now, insurers have been steadily adding to reserves in the so-far forlorn hope of catching up to their seemingly limitless potential liability for asbestos-despite the facts that the mineral has long been absent from most workplaces and that CGL policies haven't covered the exposure since the mid-1980s. While mesothelioma, the cancer that can result from prolonged exposure to asbestos, is all too real and certainly deserving of compensation, employers and their insurers have pointed out that a high percentage of the billions already paid out in asbestos claims have gone to people who have mild or even no symptoms. Indeed, plaintiff's attorneys have been known to conduct mass X-ray screenings in search of workers whose lungs may show evidence of scarring, regardless of whether they currently are in good health. Meanwhile, the genuinely ill sometimes have been left in the lurch.

A couple of years ago, an article in the Wall Street Journal noted that more than 200,000 asbestos claims were pending and that thousands more were being filed at triple the rate of prior years. Today, according to information posted at a Web site for a wholesale-distributor association, the number is up to 600,000. Web sites for the Risk & Insurance Management Society and The National Association of Mutual Insurance Cos. put the figure at more than 700,000 claims. The American Insurance Association recently said it topped 730,000. Whatever the precise count, I think it's safe to say it signifies an enormous and expanding problem. No wonder insurers have been clamoring for Congress to put a lid on it.

In the new Congress, that effort has been taken up by Sen. Arlen Specter (R-Pa.), chairman of the Senate Judiciary Committee. Last month, the committee held a hearing on a draft of the proposed Fairness in Asbestos Insurance Resolution Act of 2005. Sen. Specter was expected to introduce the actual bill before the end of the month. It would reprise from 2003 and 2004 incarnations of the legislation the idea of replacing the tort-based approach to dealing with asbestos claims with a national trust fund that would compensate victims meeting certain medical criteria on a no-fault basis.

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

From insurers' point of view, the problem with the fund, more than just its stunning size, is that it might not actually put an end to the asbestos-litigation mess. Testifying at the Senate Judiciary Committee hearing, Craig Berrington, general counsel for the American Insurance Association, noted that drafts he had reviewed, far from creating one national solution to asbestos claims, would allow them in certain circumstances to revert back to state courts.

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

He also complained that it was impossible to fix insurers' cost under the draft. He said the $46 billion contribution envisioned for insurers in S. 2290 (last year's version of the asbestos-litigation reform bill) "represents the maximum, not a floor." He also said the draft did not take into account the amount carriers had paid for claims since S. 2290 was originally proposed. Nor was Berrington thrilled with the fact that the draft would call for insurers to accelerate their payments to the fund, "effectively increasing insurer funding obligations." On top of all that, he expressed concern that the trust fund in some ways appeared to be "made to fail," which could leave "insurers in the position of having paid tens of billions into the trust fund, while still facing the prospect of decades of additional litigation should the trust fund go out of existence."

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

The Big 'I' and other producer organizations are right to be concerned about this matter. As the association previously has noted, independent agents and brokers have an important stake in seeing the asbestos-litigation problem resolved. It affects the cost and capacity for myriad insurance products and calls into question the financial stability and long-term prospects of a number of major carriers they do business with.

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

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