BestWeek: Handicapping the Chances of Success for Specter's Asbestos Fund.

OLDWICK, N.J. -- Despite a more than 30-year effort by the insurance industry to seek final settlement of scores of asbestos-related claims, a large contingent of insurers has concluded that Sen. Arlen Specter's $140 billion trust fund proposal simply isn't the answer.

Given Washington's track record on the asbestos issue, the Pennsylvania Republican's bill is far from guaranteed passage, with or without the insurance industry's support. Political analysts Kim Wallace and Rami Armon of equities firm Lehman Bros. place the likelihood of passage this year at around 25%, according to an in-depth report in the May 23, 2005 issue of BestWeek.

Nearly half of the industry's obligations would be paid over the first five years of the program, with the bill calling for insurers to pay aggregate amounts of $2.7 billion annually for the first two years of the fund's existence and $5.075 billion annually for the following three years. That $20.6 billion in payments would just about exhaust the U.S. industry's current reserve levels, though some insurers may seek alternative means to finance their obligations, noted Gerard Altonji, managing senior financial analyst with A.M. Best Co.

Exclusive A.M. Best data show that incurred asbestos losses ranged from $1 billion in 1991 to $3.4 billion in 1995, then fell to $885 million in 1997, before spiking to $4 billion in 2001 and $8 billion in 2002, and finally tapering off to $6 billion in 2003. As of year end 2003, A.M. Best estimated the industry's incurred-to-date losses to be about $52 billion, while preliminary data for 2004 show an additional $2.73 billion incurred last year.

Other exclusive content in the May 23 issue of BestWeek:

--Why passage of the bill to create the asbestos compensation trust fund would mark the beginning--rather than the end--of the legislation's real test;

--How some of President Bush's federal judicial nominees have ruled on insurance litigation; and

--Why it's more important than ever for directors and officers insurers to be selective in what risks they pursue and how best to structure coverage.

BestWeek is published by A.M. Best Co. for insurance professionals, including home office executives, agents and brokers.

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A.M. Best Co., established in 1899, is the world's oldest and most authoritative insurance rating and information source. For more information, visit A.M. Best's Web site at http://www.ambest.com.