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STAMFORD, Conn.—Crane Co. will receive $33 million in settlement of liability insurance claims against London-based Equitas Ltd., contingent on what happens with federal asbestos liability reform efforts.
The settlement, announced Monday, involves asbestos and other liability claims and resolves all claims against pre-1993 policies issued to Crane by certain Lloyd's of London underwriters that are reinsured by Equitas. Under the agreement, Crane Co.—a Stamford, Conn.-based manufacturer—will receive $1.5 million this year. The rest of the settlement will be paid into an escrow account for payment of future asbestos claims.
Funds remaining in the escrow will be paid to Crane on Jan. 3, 2007, if no federal asbestos liability reform law is enacted by then. If a such a law is enacted, the remaining funds in the escrow will be paid back to Equitas, subject to the payment of an additional $1.5 million to Crane and, according to a statement released by Crane, "a hold-back of certain funds in the escrow for the payment of asbestos claims during the year following enactment of asbestos legislation."
The Senate Judiciary Committee approved a bill in late May that would create a national trust fund to replace the current litigation-based system for compensating victims of asbestos-related disease, but the full Senate has not begun to consider the measure. A bill that would require claimants in asbestos injury cases to meet specific medical criteria proving impairment has been introduced in the House, but it has not been taken up by the House Judiciary Committee.
LONDON-Equitas Ltd. has settled its largest remaining direct asbestos liability for $415 million. The deal is the latest in a series of large settlement agreements made by the runoff reinsurer.
London-based Equitas, the runoff reinsurer for the pre-1993 long-tail liabilities of Lloyd's of London syndicates, reached a settlement agreement with Houston-based McDermott International Inc. for the asbestos claims of its subsidiary, The Babcock & Wilcox Co., which is in Chapter 11 reorganization. Babcock & Wilcox, which makes power-generation systems and equipment, filed for Chapter 11 bankruptcy protection in 2000 because of large asbestos claims.
Under the terms of the settlement deal, Equitas has paid $415 million into a trust account. The deal is subject to a number of conditions, including court approval and the final confirmation of B&W's reorganization plan. The $415 million will be held in trust until the contingencies have been satisfied, then it will be transferred to an escrow account for current and future asbestos claimants.
If those conditions are not met, or are waived, the $415 million payment will be returned to Equitas, Scott Moser, chief executive of Equitas, explained.
The B&W deal was the first time that Equitas has negotiated a policy buyback settlement directly with claimants' lawyers, noted Mr. Moser.
He said that he hoped that Equitas would be able to reach similar deals with other companies it now insures that are in bankruptcy.
Since 2003, Equitas has paid $2.2 billion in 11 major asbestos settlements. And Mr. Moser said the runoff reinsurer would continue to seek such deals where it believes a settlement would be fair to both parties.
Mr. Moser pointed out that future agreements will likely be smaller, though, as many of the company's largest asbestos exposures have now been settled.
``I don't expect we'll settle anything for half as much as this one,'' Mr. Moser said.
Equitas also has settled 47 of its 50-largest pollution liabilities, noted Mr. Moser, and will actively seek settlements for the remaining claims.
<< Copyright ©2005 Crain Communications Inc. >>
Equitas, the unlisted reinsurance company created to save the Lloyd's insurance market from collapsing under the weight of asbestos-related claims, will announce today that it has agreed settlements with a further six significant policyholders at a total cost of Dollars 300m (Pounds 167m).
Included in the agreements are settlements with Kaiser Aluminium, a producer of fabricated aluminium products, Crane Company, an engineering group, and Congoleum, which makes resilient sheet and tile floor coverings, as well as three companies whose identities have not been disclosed.
Glenn Brace, Equitas's claims director, said the agreements reflected further progress on closing the largest company liabilities that remained after a Dollars 415m settlement with Babcock & Wilcox, a US engineering company, in March. This was the largest remaining single exposure to a company faced by Equitas.
"This (today's agreements) is further progress, but it is not a conclusion of our efforts to negotiate these settlements," said Mr Brace. "I hope that we will be able to close some additional ones in the remainder of this year."
He added: "We continue to seek comprehensive settlements and are currently in negotiations with other major policyholders."
Other large settlements with companies to date include a Dollars 472m agreement with Honeywell in April 2003, a Dollars 575m settlement with Halliburton in January 2004, and a Dollars 200m deal with four policyholders including Dana Corporation, the US car parts group, in January this year.
In total, since April 2001, Equitas has resolved 35 large asbestos settlements with companies involving the payment of more than Dollars 2.9bn.
Equitas said the settlements with Kaiser Aluminium and Congoleum were subject to conditions relating to the pending bankruptcies of these companies.
Mr Brace said the settlements and the bankruptcies had to be approved by the courts before the payments, which have been placed in trust or escrow, transfer to the companies. If these conditions were not satisfied, the settlement amounts, would be repaid to Equitas, it said.
The latest settlements come as US lawmakers work on a US asbestos compensation fund. When Equitas announced its 2004 results in June, it said the situation surrounding the proposed US legislation to set up the compensation fund remained uncertain.
In April, Equitas won a significant concession from senior US lawmakers about its treatment in the bill. But it is not certain if the bill in its current form will be passed.
The US asbestos compensation fund is expected to come back onto the agenda when Congress returns next month.
<<Financial Times UK -- 08/31/05>><< Copyright ©2005 Financial Times Ltd. >>
LLOYD'S ventures have built up more run-off liabilities in the last dozen years, than the volume of run-off remaining in Equitas, writes James Brewer.
Equitas is the vehicle created to save the market from collapse from disastrous 1992 and prior underwriting, and has been settling some of its biggest obligations recently.
At the end of 2004, total liabilities of syndicates in run-off for 1993 and subsequent years of account were GBP7.2bn ($13bn), according to a survey by KPMG, the accountancy group which advises on corporate recovery.
At Lloyd's this is a reduction of GBP500m on the previous year, but the figure being dealt with by Lime Street practitioners is now much higher than the discounted liabilities of GBP4.6bn (undiscounted GBP6.4bn) at Equitas.
Run-off involves books of business either naturally discontinued, or where businesses collapse.
KPMG, which was commissioned to conduct the survey by the Association of Run-Off Companies, said that as in 2003, the largest proportion of run-off liabilities at Lloyd's related to the 2001 year of account, in which there was a significant level of US casualty and World Trade Center loss.
Overall, the UK run-off market reduced in size by 6% measured by total liabilities of GBP38.4bn, mainly as a result of continued efforts by Equitas to eliminate its US asbestos and environmental exposures.
Many of the Lloyd's cases are being handled by outsourced providers, and there is provision for transferring run-off outside the market, although that has yet to occur.
Steve McCann, head of open years management at Lloyd's, has been strengthening procedures and improving ways of monitoring performance of providers.
<<Lloyds List -- 09/08/05>< Copyright ©2005 Informa Martime Trade and Transport >>