Equitas Settles Travelers Claims For $245M
Over half of payments related to asbestos bodily injury losses, put in trust
Equitas has agreed to pay Travelers Property Casualty Corp. $245 million to settle reinsurance claims, the bulk of them involving asbestos injuries, the Lloyd's runoff operation announced last week.
Equitas said payment for a comprehensive settlement between Travelers and Lloyd's of London underwriters reinsured by Equitas would be made on March 31.
Equitas said the payment will resolve all current and future claims made both by Travelers against reinsured underwriters and by reinsured underwriters against Travelers. The agreement includes all policies involving the former Aetna property-casualty companies acquired by Travelers in 1996.
A representative for Travelers, based in Hartford, said the claims involved had been generated by "a range of commercial lines clients third-party liability insureds that were covered by the former Aetna and Travelers in 1992 and prior."
As part of the agreement, $150 million of the payment, representing the amount relating to asbestos bodily injury claims, has been placed in a trust. Equitas said it has the option to take back those funds in the event Congress passes asbestos reform legislation (see related story on this page). Were that to happen, the non-asbestos part of the settlement would be unaffected.
Equitas claims director Glenn Brace said the settlement is an encouraging result for the company that is running off Lloyd's pre-1993 claims.
"In January, we concluded an agreement with Halliburton that resolved our largest direct asbestos exposure. With this latest settlement, we resolve our largest reinsurance exposure," he noted.
"While we recognize that some parties may need or prefer to deal with Equitas on a transaction-by-transaction basis, perhaps even over many years, we believe global agreements are better economically for both parties and we remain committed to agreeing on global settlements with counter parties wherever we can," he added.
A second Equitas representative said the settlement involved "nothing significant" in the way of disputes. "The reason for the deal is both parties are seeking certainty" for long-tail claims, the official explained.
Referring to the trust arrangement to cover asbestos claims, the official explained that in the event of legislation by Congress, "we're protecting our interest, getting full credit for what we've settled."
Equitas, based in London, was established to reinsure and run off pre-1993 non-life liabilities at Lloyd's.
Before the settlement, Travelers said in its form 10-K filing with the U.S. Securities Exchange Commission that as of Dec. 31, 2003 there was $269.1 million recoverable from Equitas. The company said that as of Dec. 31, 2003 it had an allowance for estimated uncollectible reinsurance recoverables of $386.4 million.
Reproduced from National Underwriter Property & Casualty/Risk & Benefits Management Edition, March 25, 2004. Copyright 2004 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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