Equitas Boosts AsbestosReserves By 27 Percent
London Editor
During the past year, Equitas strengthened undiscounted asbestos reserves, gross of reinsurance, by 1.7 billion ($2.4 billion), a 27 percent boost to 8 billion ($11.4 billion), according to the groups financial results for the year ended March 31, 2001.
Before releasing its results last week, including the reserve growth, Equitas along with other London insurers in May announced tightened documentation requirements for asbestos-related claims that took effect June 1 (see NU, May 14, page 1).
"The increase in asbestos reserves has more than offset the entirety of the gains produced in all other areas of the business and has accounted for the decrease in accumulated surplus and solvency margin," said Equitas Chairman Hugh Stevenson, in a statement.
During the year ended March 31, accumulated surplus decreased by 84 million ($119.3 million) to 700 million ($994 billion) and the solvency margin decreased from 11.2 percent to 9.5 percent at Equitas, which is the reinsurer set up by Lloyds to reinsure and run off the markets pre-1993 non-life liabilities. (The exchange rate used by Equitas on March 31 was $1.42 to 1).
Nevertheless, since Equitas began operations in September 1996, surplus has risen from 588 million ($835 million) to 700 million and the solvency margin grew from 5.6 percent to 9.5 percent, Equitas said. (The solvency margin is the accumulated surplus stated as a percentage of net claims outstanding.)
Gross claims paid by Equitas during the year came to 2.1 billion ($3 billion)–nearly the same as the previous year. Equitas said most asbestos claims will not be received or paid by Equitas for many years.
"While asbestos reserves have been increased significantly over the past two years, actual cash payments in respect of asbestos claims during that period have been lower than the groups previous estimates," the company said in a statement.
Reproduced from National Underwriter Property & Casualty/Risk & Benefits Management Edition, July 30, 2001. Copyright 2001 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.
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