Transcript Asbestos Issues and Trends Casualty Actuarial Society Seminar on Ratemaking – What Now?

Asbestos Issues and Trends
Casualty Actuarial Society
Seminar on Ratemaking
Concurrent Session: Emerging Risks – What Now?
March 27, 2003
Jennifer L. Biggs, FCAS, MAAA
Tillinghast – Towers Perrin
What is Asbestos?
 Naturally occurring fibrous mineral with a crystalline
structure containing long chains of silicon and oxygen
 Six types
 actinolite
 amosite
 anthophylite
 crocidolite
 tremolite
 chrysotile
 flexible
 strong
 durable
 fire resistant
 separable into filaments
 abundant quantities
 “Miracle Mineral”
 “Protector of Human Life”
 ironically thought to be the protector of people
2
Asbestos Usage
 Peaked in the early 1970s
 Contained in ~3,500 products (1989 EPA study)
 Still legal in the U.S. today
 Ban on asbestos promulgated by the EPA in 1989 was remanded
by the U.S. Fifth Circuit Court of Appeals in 1991
 Only a few portions of the ban remained intact: new product uses;
rollboard; flooring felt; and commercial, corrugated, and specialty
paper
 No effective warning label requirements
 Not tracked effectively
 Large manufacturers report annually to Toxic Release Inventory
 No requirements for small manufacturers
 Imports (especially building materials)
3
Exposure and Disease
 Exposure
 Early epidemiological studies estimated ~27 million workers
experienced significant occupational exposure to asbestos
 Recent forecasts of the Manville Trust suggest an exposed population
in excess of 100 million
 Ongoing exposure
 asbestos containing products
 asbestos in-place
 Typical American breathes ~1 million fibers per year via natural and
man-made sources
 Disease
 Documented and recognized as cause of disease since 1920s

Pliny the Elder had noticed a significantly high number of lung related
sicknesses in servants working with asbestos cloths and fibers
 Pleural thickening, asbestosis, lung and other cancers, mesothelioma
 Long latency
4
Why So Much Litigation?
 Large percentage of population
exposed
 Signature diseases
 Potential for large jury awards
 Economies of scale for plaintiff
attorneys
 Insurance recoverables
5
The Asbestos Litigation Environment Has Changed
 Increasing costs to defendants...
 Surge in claim filings
 Rescission of previous settlement agreements
between plaintiffs attorneys and defendants
 Bankruptcies
 ...and increasing costs to insurers and reinsurers
 Increased costs for existing defendants
 Additional costs for new defendants
 Additional coverage accessed
6
Claim Filings Appeared Fairly Stable in Early 1990s
(Thousands)
5 0 .0
4 0 .0
3 0 .0
2 0 .0
1 0 .0
0 .0
1991
1992
CCR 1
1993
CCR 2
N o n -C C R 1
1994
1995
N o n -C C R 2
7
CCR Claim Filings Increased After Georgine’s Reversal
90.0
80.0
70.0
60.0
50.0
40.0
30.0
20.0
10.0
0.0
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000
Avg CCR 1(91-95)
CCR 1
Avg CCR 2(91-95)
CCR 2
8
Non-CCR Claim Filings Also Increased
100.0
90.0
80.0
70.0
60.0
50.0
40.0
30.0
20.0
10.0
0.0
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002
Avg 91-94
NonCCR 1
NonCCR 2
9
Surge in Personal Injury Claim Filings
 Causes
 “catch up” for CCR defendants post Georgine
 greater propensity to sue
 asbestos specialty firms, union hall screenings, Sunday
sports page advertisements, Internet, doctors, new
claims
 acceleration of claim filings
 anticipation of tort reform; bankruptcy creditor lists;
statute of limitations
 Effects
 Increased costs to all parties!!
 change in disease mix mitigates the increase
 continued ability to bundle claims will drive costs
10
Change in Disease Mix
Manville Trust - Injury by Year Filed
100,000
90,000
80,000
Number of Claims
70,000
60,000
(Denied) or Unknown
Non-Malignant
50,000
Cancer
Mesothelioma
40,000
30,000
20,000
10,000
0
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
Year Filed
11
Change in Disease Mix
Manville Trust - Injury by Year Filed
100%
Percent of Claims Filed by Category
80%
77%
82%
83%
89%
85%
86%
91%
84%
89%
87%
91%
93%
Non-Malignant
60%
Cancer
40%
20%
Mesothelioma
13%
12%
11%
7%
10%
0%
1990
6%
5%
4%
1991
1992
1993
9%
9%
10%
6%
5%
4%
3%
6%
1994
1995
1996
1997
7%
8%
4%
5%
3%
1998
1999
2000
6%
4%
2%
2001
Year Filed
12
Increasing Numbers of Claimants Are Unimpaired
1982
4% of claims showed no manifest asbestos-related injury
(RAND)
1993
Up to one-half of all asbestos claims have little or no physical impairment
(Harvard Journal of Legislation)
1998
No evidence of disease in 57% of asbestos claims
(Manville Trust)
74% of pending claims are unimpaired
(confidential report prepared for a defendant)
2001
Two-thirds of claims show no evidence of impairment
(Babcock & Wilcox)
Vast majority of claims provide no evidence of impairment
(W.R. Grace)
Source: RAND
13
Other Trends in Claim Filing Activities
Fi l i n g s M o ved f r o m Fed er al
t o St at e Co u r t s
50
Percent
of filings
in federal
courts
40
30
20
10
0
Pre-1988
1988–1993
1994–1997
1998–2000
Source: RAND, January 2003
14
Other Trends in Claim Filing Activities
…and from some states to others
100
MD
Other
states
80
TX
60
Percent
IL
40
NJ
OH
MS
PA
WV
20
NY
CA
0
1970–1987
1988–1993
Source: RAND, January 2003
1994–1997
1998–2000
15
$ U . S.
Observations –
Average Settlements by State
1
2
3
4
5
6
7
8
9
10
11
CW
St at es
16
%
Observations –
Disease Mix by State
1
2
3
4
5
6
7
8
9
10
11
CW
St at es
M eso t h el i o m a
Can cer
N o n -M al i g n an t
17
$U.S.
Observations –
Average Settlements by Disease
Countryw ide
State 1
M esothelioma
State 2
Lung Cancer
State 3
Non M alignant
18
Individual Claim Costs Also Increased
 Mean verdicts to plaintiffs increased dramatically from
1998 to 2001 (RAND)
 Mesothelioma: ~$2M to ~$6.5M
 Other cancer: ~$1M to ~ $2.5M
 Asbestosis:
~$2.5M to ~$5M
 Damages paid by many individual defendants also
increased dramatically, reflecting
 increase in plaintiff awards
 higher shares for remaining defendants
19
Frictional Costs in the System are High
 According to RAND, transaction costs have consumed
more than half of total spending
100
Plaintiff
Compensation
80
60
Percent
Plaintiff Expenses
40
20
Defense Expenses
0
1980s
Litigation
1990s
Litigation
 And they are likely to go back up in next decade
20
Bankruptcy of Defendants
 Currently at least 67 bankruptcies of companies with asbestos-
related problems according to testimony prepared by the
American Academy of Actuaries (www.actuary.org)
 Bankruptcy cited as “legislative solution” by Babcock & Wilcox
 New bankruptcies may:
 Increase costs for remaining defendants

Several defendants cited higher settlement demands as
a cause of bankruptcy
 Cause need for additional defendants
 Approximately 300 asbestos defendants in early 1980s
 Estimates of ~2,000 published a few years ago
 RAND estimates over 8,400 today
21
Number of Asbestos Related Bankruptcies
per Year
14
12
12
10
Number
10
8
6
6
5
4
4
3
3
3
3
3
2
2
1
1
2
2
1
1
0
0
1
0
0
1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002
Note: Excludes two bankruptcies for which no date is available.
22
Expansion of Defendant List
 Defendant list continues to expand since asbestos was used
historically in a wide variety of products, including:
 yarn, thread, felt, rope packing, flame resistant cloth
 steam gaskets and packings, plain and corrugated paper, rollboard, millboard,






high temperature insulation, movie props
World War II Ship Building
molded brake linings, brake blocks, filler in plastics, flooring, pottery, insulated
wire, pipe covering
brake shoes, clutch facings, cement, plaster, stucco, shingles, siding, tile,
sewer pipes, blocks
corrugated roofing, roof sheathing, roofing cement
boiler insulation; insulation of walls, floors, mattresses
paints, varnishes, filter fibers, filter pads
 According to RAND Study
 Firms in current list of defendants span 75 of 83 possible 2-digit SIC
codes/industries
 Over 60% of expenditures are now from non-traditional defendants
23
Costs through 2000 were substantial, but tell only part of
the story
 According to RAND, estimated total costs of resolving
asbestos claims through 2000: $54 B
 U.S. insurers
$22 B
 Insurers outside U.S.
$8–$12 B
 Defendants
$20–$24 B
 At least 5 major companies have each spent more
than $1 B on asbestos litigation
Source: RAND, January 2003
24
How to Quantify Asbestos Liabilities?
 Actuaries typically like to use past experience to
predict the future
 However, for asbestos we can’t use traditional
actuarial methods (e.g., accident year loss
development projections)
 Long latency from exposure to disease
manifestation
 Potential involvement of multiple policy periods for
individual claims
25
How to Quantify Asbestos Liabilities?
 Many use benchmarks or rules of thumb
 Market share techniques
 For example, 5% of GL premium volume for affected years
translates to 5% share of ultimate liabilities
 Survival ratio techniques
 equals ratio of total reserves divided by average annual payments
 U.S. net asbestos survival ratio was 8.8 (excluding Fibreboard) as
of 12/31/2001
 A.M. Best now using an undiscounted survival ratio of 18 - 20.
 Aggregate development
 multiples of paid losses, case reserves, or reported losses
 Comparisons to peer companies (e.g., significant reserve
additions)
26
How to Quantify Asbestos Liabilities?
 Exposure-based modeling will improve understanding
of ultimate A&E liabilities
 For an insurer or reinsurer, it considers
 Mix of insureds
 Types of coverage
 Policy wording
 Attachment points and limits
 Years of coverage
 Claims handling and settlement activities
 Greater understanding equips the defendant, insurer,
or reinsurer to deal strategically with its exposure
27
Tillinghast – Towers Perrin Estimates of Ultimate
Personal Injury Claim Costs
 Tillinghast estimates ultimate loss & expense relating
to U.S. exposure will be $200 billion
 Two approaches:
Top-Down
 Focused on total
awards to plaintiffs
 Estimated # future
filings by disease
 Estimated indemnity
cost and trended by
disease
 Loaded for expense
 Focused on amounts
paid by defendants
 Assigned defendants
to tier
 Estimated # future
filings, indemnity, and
expense by tier
 Allocated ultimates to
year and compared to
insurance coverage
Bottom-Up
28
Estimation of Ultimate Loss and Expense –
Top Down
 Estimate total awards to plaintiffs ~$200 billion
 Estimate number of personal injury filings by disease by calendar year
 Estimate average indemnity by disease

Trend to future years
 Multiply future filings by trended severities
 Load for expense
F = # Claims
Year
2000
2001
2002
2003
2004
.
.
.
2010
.
.
.
2020
.
.
.
2030
.
.
.
2040
.
.
.
Meso
LC
S = Avg. Indemnity
NM
Reflects
 exposure
 latency
 disease incidence, and
 propensity to sue
~ 1 million
Meso
LC
Trended
NM
Total Cost Incl.
Expense
(F X S)
x (1 + expense)
~ $200 B
29
Estimation of Ultimate Personal Injury Claim Filings
-2
04
9
20
45
-2
04
4
20
40
-2
03
9
20
35
-2
03
4
20
30
-2
02
9
20
25
-2
02
4
20
20
-2
01
9
20
15
-2
01
4
20
10
-2
00
9
20
05
20
00
-2
00
4
Number of Filings
Tillinghast Projection of Asbestos Related Filings
Calendar Year
Meso
Lung Cancer
Non-Malignant
30
Estimation of Ultimate Loss and Expense
-2
04
9
20
45
-2
04
4
20
40
-2
03
9
20
35
-2
03
4
20
30
-2
02
9
20
25
-2
02
4
20
20
-2
01
9
20
15
-2
01
4
20
10
-2
00
9
20
05
20
00
-2
00
4
$ Expected Loss
Tillinghast Projection of Asbestos Related Ultimate Losses
Filed Year
Meso
Lung Cancer
Non-Malignant
31
Estimation of Ultimate Loss and Expense – Bottom Up
 Estimate total cost to defendants ~$200 billion
 Develop database of defendant experience



Number of filings against defendants
Average indemnity (defendant’s share)
Expense-to-indemnity ratios
 Resulting distributions vary by tier
The Types of Asbestos Defendants
Tier 1: Manufacturer/producers in litigation
since inception
 Will use all available insurance
coverage
Tier 2: Became involved shortly after Tier 1
companies
 Some will exhaust all insurance
coverage
 Others will not hit highest layers
due to smaller share of industry
Tier 3: Manufacturers, distributors and
installers brought into litigation due
to Tier 1 and Tier 2 bankruptcies
 Lesser exposure due to
encapsulated products or limited
distribution
Tier 4: Owned/operated facilities where
asbestos used and third parties
exposed on premises
32
Estimation of Ultimate Loss and Expense – Bottom Up
 Project future filings for each defendant

implies ~60 defendants per plaintiff case
 Project future severities by defendant

implies average ultimate severities of $1,873 to $5,550 – vary by
tier.
 Project future expenses (defense costs) by defendant


Implies average ultimate expense loads of 20% to 116% – vary by
tier.
Reflects a reduction in expenses for Tier 3-Low defendants over a
five year period.
 Ground-up ultimate loss and expense for each defendant
= Filings x Trended Indemnity Severities x (1 + expense)
 Allocate ground-up ultimate indemnity and expense to year

Compare to average defendant coverage profiles
33
Estimation of Ultimate Loss and Expense – Bottom Up
 Determine percentage insured, by defendant
 Allocate ground-up ultimate indemnity and expense to year
 Compare to average coverage profiles

Expense treatment varies by policy
Asbestos Insured XYZ's Coverage Chart
Coverage Amount $
Excess 5
Excess 4
Excess 3
Excess 2
Excess 1
----------------- Self - Insured --------------------
Primary
1930
…
1978
1979
1980
1981
1982
1983
1984
1985
1986
Year
 Consider reinsurance cessions
34
More Detailed Coverage Description
of Excess 1 Layer in 1980
8
Excess 2
$ Millions
6
4
Excess 1
10%
Insurer
ABC
Excess 1
20%
Insurer
DEF
Excess 1
70%
Excess 1Insurer
10%
Excess 1
GHI
Insurer
ABC
70%
Insurer
GHI
2
Primary - Insurer JKL
0
1980
35
Comparison of Loss Allocated to 1980
to Available Coverage of Insurer ABC
 For example, if Insurer ABC wrote 10% of $5 million xs of
$1 million in 1980, and ultimate losses allocated to 1980
totaled
  $1,000,000, then Insurer ABC’s gross liability would
be $0
 $4,000,000, then Insurer ABC’s gross liability would be
$300,000 (= 10% x ($4,000,000 – $1,000,000))
  $6 million, then Insurer ABC’s gross liability would
exhaust its limit of $500,000
36
Coverage Expansion
 Roll-forward of coverage blocks
 Reclassification of products claims as non-products
claims by traditional products defendants with
installation activities with exhausted (or nearly
exhausted) products coverages
 reinstates previously exhausted products coverages
 opens up previously “untapped” non-products
coverages
 non-products coverages may not have aggregate
limits
37
Allocate Ultimate Loss and Expense
Among Multiple Payers
Defendant
Cost
Retained
Insured
Direct –
U.S.
Retained –
U.S.
U.S.
Direct –
London
Retained –
London
Ceded
London
Other
U.S.
Ceded
London
Other
38
Portion of $200 billion Ultimate Loss and Expense – Retained,
Net Insured U.S., Net Non-U.S.**
Net No n U.S.
In su red
31%
Ret ai n ed
by
Def en d an t s
39%
Net U.S.
In su red
30%*
*$60 billion mid-point of $55 – $65 billion range of the “Universe” of net liabilities to the U.S. P/C market.
**Additional details available in Emphasis 2001/3, “Sizing Up Asbestos Exposure,” a publication of Tillinghast –
Towers Perrin, at www.towers.com.
39
$ Billions
Paid and Reported Loss and Expense Compared to Estimates
of Net U.S. Ultimate Liability
70
70
60
60
50
50
40
40
30
30
20
20
10
10
0
0
1994
1995
1996
1997
1998
1999
2000
2001
Tillinghast 12/1996 Ultimate ($38-43 billion)
Tillinghast 2001 Ultimate ($55-65 billion)
A.M. Best 1997 Ultimate ($40 billion)
A.M. Best 2001 Ultimate ($65 billion)
Cumulative Paid ($23.5 billion)
Outstanding Case & IBNR ($13.0 billion)
40
Recent Insurer Disclosures
 There were several sizeable reserve increases during
2001-2002:
 CNA – $1 billion pre-tax per A.M. Best; $750 million
after tax (August 3, 2001)
 ECRA – $1 billion pre-tax estimated by A.M. Best
(February 2002)
 The Hartford – Reallocation of $540 million “all
other” run-off reserves to asbestos (July 2002)
 Chubb – $590 million by December 31, 2002
 St. Paul – $987.5 million settlement with Western
MacArthur
41
Recent Insurer Disclosures
 And the trend continues in 2003:
 Travelers increased net asbestos reserves by $2.45
billion (January 14, 2003)
 disclosed major results of the study (policyholders
with settlements, other policyholders, assumed
reinsurance, unallocated IBNR)
 ACE USA increased A&E reserves (January 27, 2003)
 $2.18 billion gross
 $1.86 billion reinsurance recoverable
 $354 million after-tax charge
 Argonaut increased asbestos reserves by $52.8 million
(March 2003)
 The Hartford has announced an exposure-based study
to be completed later this year
42
Recent Insurer Disclosures
 Some have made statements of adequacy
 CNA
 AIG
 Allstate
 Increased pressure on peer companies to make similar
disclosures
43
Recent Increases in Recognized Liabilities
And around the world:
 Chester Street
 placed in provisional liquidation (January 2001)
 entered a “Scheme of Arrangement”
(March 5, 2001)
 Equitas
 £1.5 billion as initially undisclosed portion of total
strengthening as of March 31, 2000
 £1.7 billion ($2.4 million) as of March 31, 2001 (announced
July 2001)
 No change as of March 31, 2002 (announced July 2002)
 Royal & Sun Alliance – $538 million for U.S. and U.K. (February
2002)
 U.S. pre-tax charge of $241 million estimated by A.M. Best
44
And the costs extend beyond personal injury claims costs paid
by defendants and their insurers...
 “The Impact of Asbestos Liabilities on Workers in Bankrupt
Firms” by Joseph E. Stiglitz, Jonathan M. Orszag, Detr R.
Orszag – December 2002
 Bankruptcies across the nation
 headquarters in 19 states
 facilities in 47 states
 Pre-bankruptcy, 200,000 workers employed by bankrupt
firms
 Loss of 52,000 – 60,000 jobs with each displaced worker
losing an average of $25,000 – $50,000 in wages
 Average 25% reduction to their 401(K) account (approx.
$8,300 each)
 Direct cost of bankruptcy: $850M – $1.7B
 NERA – $2 Billion Secondary Impacts on the Economy
45
Where Do We Go From Here?
Recent Changes in Claims Handling
 Asbestos claims handled differently than other torts
 volume/docket pressure
 bundling
 Center for Claims Resolution (CCR) changes its
procedures
 abandons practice of routinely settling cases on a
group basis and requiring members to share
settlement costs (February 2001)
 stops settling new asbestos claims for remaining 14
members effective August 1, 2001; in run-off
 Equitas leads London insurers, requiring evidence of
injury and product identification effective June 1, 2001
46
The Coalition for Asbestos Justice
 Formed in 2000 as a nonprofit association to address and
improve the asbestos litigation environment
 Currently has eleven members: Ace, Argonaut, Chubb,
CNA, Everest Re, Fireman’s Fund, General Re, Great
American, The Hartford, Liberty Mutual, and St. Paul
 Mission: To encourage fair and prompt compensation to
deserving current and future asbestos litigants by seeking
to reduce or eliminate the abuses and inequities that exist
under the current civil justice system
 Coalition is not involved with insurance coverage issues
 Working to effect change through public education
(including the judiciary), amicus briefs, and jurisdictional
litigation efforts
47
Public Education
 A primary mission of the Coalition is to foster a better
understanding of the current asbestos litigation environment
 Research and Studies (e.g., RAND Study update
(www.rand.org))
 Academic Scholarship
 Victor E. Schwartz & Leah Lorber, “A Letter to the Nation’s
Trial Judges: How the Focus on Efficiency Is Hurting You
and Innocent Victims in Asbestos Liability Cases” 24 Am. J.
Trial Advoc. 247 (2000)
 Mark D. Plevin & Paul Kalish, “Where Are They Now? A
History of the Companies That Have Sought Bankruptcy
Protection Due to Asbestos Claims” Vol. 1, No. 1 Mealey’s
Asbestos Bankr. Rep., Aug. 2001
 “This is NOT your father’s asbestos defendant”
48
Jurisdictional Litigation Efforts
 Identifying jurisdictions that pose the biggest
challenges for asbestos defendants and truly sick
claimants
 Key states: CA, IL, LA, MD, MA, MS, NJ, NY, PA,
TX, WV
 Meeting with counsel from these states to understand
the current case management orders and identifying
other due process issues
 Advancing inactive dockets / pleural registries
 Challenging consolidations and joinder rules
49
Changes in the Wind?
 There are a few signs in the asbestos litigation environment that
business may not be as usual
 A split in the asbestos plaintiff’s bar between those representing
“real” cases versus those representing the non-impaired
 House of Delegates of the American Bar Association (ABA) voted
on February 11, 2003
 to support legislation that would establish specific medical
criteria that must be satisfied by those alleging non-malignant
asbestos-related disease in order to file an asbestos lawsuit
 proposal would also toll statute of limitations until such time as
the medical criteria were met
 Judge Weiner’s ruling in the Federal MDL dismissing all cases that
were initiated through mass screenings
 Hearing held by Judges Weinstein and Lifland in the Johns
Manville bankruptcy proceeding
50
Changes in the Wind?
 There are a few signs in the asbestos litigation
environment that business may not be as usual
 West Virginia passes SB 213 limiting the ability of
non-resident plaintiffs to maintain causes of action
 Mississippi passes HB 19 limiting punitive awards,
reduces venue shopping, releases “innocent seller”
(January 2003)
 Pennsylvania Asbestos Legislation (SB 216) dealing
with asbestos-related liabilities acquired via merger
or consolidation
 Many more articles in the business press and from
investment analysts advocating the need for an
asbestos solution
51
U.S. Supreme Court Actions
 Amchem v. Windsor
 Overturned Georgine/CCR Futures Deal (June 27,
1997)
 Ortiz v. Fibreboard
 Overturned second global settlement attempt (1999)
 Mobil Corp. v. Adkins
 Refused to hear case regarding consolidation of case
involving 8,000 plaintiffs from 35 states and 250
defendants in West Virginia
 Exxon settled October 2002, leaving Union
Carbide/Dow Chemical Company as the sole remaining
defendant
52
U.S. Supreme Court Actions
 Hopeman Brothers Inc. v. Clarence L. Acker Jr., et. al.
 Denied petition to review mass consolidation of cases
in Virginia (December 9, 2002)
 Norfolk & Western Railway Co. v. Ayers, et. al.
(March 10, 2003)
 Fear of developing cancer justifies a claim under FELA
 Joint & several liability: entire damages can be
recovered from the railroad
 Six workers with asbestosis obtained $5.8 million
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Possible Federal Legislation
 The Fairness in Compensation Act (H.R. 1283/S758) did
not advance
 would have established the Asbestos Resolution Corp.
 opposed by President Clinton and the plaintiff’s bar
 Likely prospective proposals supported by the Asbestos
Alliance (led by the American Insurance Association and the
National Association of Manufacturers) will focus legislation
on four areas
 establishing objective medical criteria of asbestos-related
impairment
 liberalizing statues of limitations
 eliminating consolidations
 eliminating forum shopping
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Possible Federal Legislation
 S413 – Senator Nickles
 Cases remain in court system
 Establish medical criteria
 Toll applicable statutes of limitation until medical criteria
are met
 Senate Hearings
 September 25, 2002 and March 5, 2003
 Discussion of medical criteria as well as an asbestos
trust fund
 Senator Hatch has called for a compromise solution by
the end of March 2003
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Quotes from Clients and Colleagues

“The claims are continuing.”

“We have more open accounts today then we did ten years ago. We’re seeing more
claims against Main Street America – distributions, hardware, HVAC.”

“Claim filings have remained steady; we expected a decrease by now.”

“Asbestos is the energizer bunny of toxic torts; it keeps going and going and going...”

“We are seeing operations claims from new defendants (contractors, distributors)”

We’ve been approached by producers seeking finite cover. The cover might be a
positive influence on financial analyst opinions … The defendants must anticipate that
filings will continue … A small number of deals are being done.”

“I expect to see at least five more bankruptcies of asbestos defendants in the next 12 to
18 months.” (This seemed to be a bold statement in September 2000; little did we know
what was to come …)

“…endless search for a solvent bystander…”

“Asbestos litigation is a profit-driven industry.”

“Don’t think of them as lawyers, think of them as venture capitalists.”

“… factories (be they lawyers) generating paper … Here’s the form, fill in the blanks …
won’t end by when I die, even when my kids die …”
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Current Status Recap
 Significant deterioration in liabilities at all levels
 Defendants, insurers, and reinsurers
 Generated by filing activities
 Mitigated by shift in disease mix to claims with lower
settlement values
 Continue to see more bankruptcies or finite deals
 May see increased attention to what the defendants
are carrying on their balance sheets
 Current focus has been from financial analysts, not
auditors
 More scrutiny from insurance regulators
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Current Status Recap (cont’d)
 More than 25 years after peak usage, we still see
significant activity on the claims side
 It’s the “Energizer Bunny” of toxic torts
 It just keeps going and going and going ...
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Michael E. Angelina
Mr. Angelina is a co-author of Tillinghast’s study regarding the asbestos “universe,” first presented on May 30, 2001 to the RAA
Education Conference and the Casualty Actuaries of the Mid-Atlantic Region (CAMAR). He is a consulting actuary with Tillinghast –
Towers Perrin in its Philadelphia office. He is a principal of the firm.
Mr. Angelina is a member of Tillinghast’s asbestos and environmental practice area, and currently coordinates research and
development activities relating to the contingent liabilities of corporate asbestos defendants assisting clients with asbestos-related
operational strategies. He has quantified reserve needs for asbestos, pollution, and other health hazards (APH) for both domestic
and international insurers and reinsurers. He has also written for Emphasis on asbestos issues, and has participated on various
industry forums, trade press, and meetings regarding asbestos liabilities. Mr. Angelina is also active in the firm’s placement initiative
for these types of exposures.
Prior to rejoining Tillinghast in January 2000, Mr. Angelina was Vice President and Actuary with Reliance Reinsurance Corp. (RRC).
He also served as the Actuarial Officer of the Finite Risk unit. His responsibilities in the financial actuarial role included: modeling
outwards reinsurance transactions, providing actuarial support and guidance for areas which had problematic implications to RRC’s
financial results, and identifying new opportunities for growth. In the Finite Risk unit, Mr. Angelina’s responsibilities included:
performing actuarial and underwriting analyses of loss portfolio transfers; developing the financial structure of potential deals; and
performing due diligence reviews of target books of business.
Incorporating his 11 years at Tillinghast prior to rejoining the firm, Mr. Angelina has been involved in a number of client assignments
including: ratemaking for personal automobile business; reserve reviews for insurers, reinsurers, excess and surplus carriers, and
self insured entities; valuations of insurance operations in support of mergers and acquisitions; financial modeling; quantification of
asbestos and pollution liabilities; and the development of pricing systems and size of loss distributions for multinational excess
insurance coverages. He is a developer of RPIL, Tillinghast’s excess of loss pricing system, and part of the Global Loss Distributions
(GLD) initiative.
Mr. Angelina is a frequent speaker at the Casualty Actuarial Society seminars on pricing and reserving for US and international
exposures and has written on risk financing costs for Captive Insurance Company Reports, as well as asbestos-related issues. Prior
to joining Tillinghast in 1988, Mr. Angelina worked for CIGNA in the workers compensation and the actuarial research units.
Mr. Angelina is an associate of the Casualty Actuarial Society and a Member of the American Academy of
Actuaries. Mr. Angelina is a graduate of Drexel University with a B.S. degree in Mathematics.
[email protected]
(215) 656-2345
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Jennifer L. Biggs
Ms. Biggs is a co-author of Tillinghast’s study regarding the asbestos “universe,” first presented on May 30, 2001 to the
RAA Education Conference and the Casualty Actuaries of the Mid-Atlantic Region (CAMAR). She is a consulting actuary
with Tillinghast – Towers Perrin in its St. Louis office. She is a principal of the firm.
Ms. Biggs is a member of Tillinghast’s asbestos and environmental practice area. She coordinates research and
development activities relating to asbestos and has quantified reserve needs for asbestos, pollution, and breast implant
liabilities for insurance and reinsurance companies. Ms. Biggs has also been active in the firm’s asbestos and
environmental reinsurance placement initiative.
Ms. Biggs has spoken at Annual Meetings of the Casualty Actuaries in Reinsurance and the Casualty Actuarial Society
regarding asbestos liabilities. Under her direction as Chairperson of the American Academy of Actuaries Mass Tort Work
Group a Public Policy Monograph: Overview of Asbestos Issues and Trends was released in December 2001.
Ms. Biggs also has significant experience in the professional liability area. Her work includes analyses of funding
requirements, self-insured retention limits, and allocation systems for self-insured trust funds of several hospitals. She also
performs reserve evaluations, opining on year-end statutory reserve levels for physician insurers. Additionally, she has
assisted insurers by analyzing rate levels and preparing filing materials for entry into new states.
Prior to relocating to Tillinghast’s St. Louis office in 1988, Ms. Biggs spent almost four years in Tillinghast’s Bermuda office.
There she gained considerable experience in financial reinsurance, performing pricing analyses for loss portfolio transfers.
Most other assignments were related to loss reserving for reinsurance and captive insurance companies.
Ms. Biggs is a Fellow of the Casualty Actuarial Society and a Member of the American Academy of Actuaries. Ms. Biggs
graduated with college honors from Washington University in St. Louis with a B.A. in mathematics and a business minor.
[email protected]
(314) 719-5843
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