Insurers To Senate: Asbestos Trust Fund Won't Work

Insurers signing the letter include American International Group, American Re-Insurance Co., Chubb, General Reinsurance Corp. and Swiss Reinsurance America Corp.

Meanwhile, three major trade associations issued a separate joint statement calling S. 2290 a "step forward" over previous asbestos reform legislation but adding that several issues still need to be resolved.

The three groups issuing the statement are the National Association of Mutual Insurance Companies, the Property Casualty Insurers Association of America and the Reinsurance Association of America.

S. 2290 would create a $114 billion trust fund, with $46 billion coming from insurance industry contributions, to resolve asbestos-related claims out-of-court. Sen. Frist has scheduled the legislation for floor debate this week, with a procedural vote on cloture (which would prevent a filibuster) possibly coming on Thursday.

The statement from the three trade associations focuses on three unresolved issues. First, the statement says, S. 2290 does not provide finality to the asbestos litigation problem. Defendants and victims, the statement says, can continue to sue insurers on a variety of theories. Moreover, the statement says, the treatment of payments already made to claimants under state workers' compensation lien laws is not yet addressed.

Second, the statement says, S. 2290 does not provide certainty about initial insurer and reinsurer payment obligations.

The current bill would create a new federal commission to determine the payments each insurer would make to the trust fund, the statement says. This commission has significant discretion when determining these allocations, with no assurances that there will be equitable initial funding allocation reflecting exposure to and liability for actual asbestos-related claims, the statement says.

Third, the statement says, S. 2290 does not provide certainty about ultimate insurer and reinsurer payment obligations.

There is no assurance, the statement says, that non-U.S. entities will be held accountable for their initial obligations on the same basis as U.S. insurers and reinsurers.

The statement says the three trade associations want to continue working with Congress to address these remaining issues.

The letter from the companies says that they agree with the joint statement from the trade groups, but they go a step further. The entire approach in S. 2290 doesn't make sense, they say.

They cite a recent letter from a major business trade group, the National Association of Wholesaler-Distributors, which says "the trust fund approach has for some stakeholders become little if anything other than a cost-shifting exercise aimed at bailing out those now experiencing the unwelcome economic effects of decisions made years ago, at the expense of everyone else."

The insurance companies say they agree with this statement.

S. 2290, as it now stands, the companies say, is inequitable, unaffordable and provides no finality or certainty to victims, defendants, insurers and reinsurers.