In the two years ended March 31, 2001, the London-based Equitas increased gross undiscounted provisions for future asbestos claims (undiscounted asbestos reserves) by a total of ?3.2 billion ($4.6 billion).

Equitas was set up to reinsure and run off the 1992 and prior years' non-life liabilities of Lloyd's of London.

However, both positive and negative developments during the year ended March 31, 2002, led the company to determine that it was not necessary "to make any further overall increase in the gross discounted provisions for future asbestos claims payments," Mr. Stevenson said in a statement.

Michael Crall, Equitas' chief executive officer, said the year had seen a continuing stream of asbestos bankruptcies, a large number of high profile court awards and no relief from the level of new claims filings.

Nevertheless, the impact of the company's claims management strategy and a more favorable assessment of inward reinsurance estimates "led us to conclude that it was not necessary to adjust the level of discounted asbestos reserves at the year end," he said.

In its annual financial results for the year ended March 31, 2002, Equitas announced that accumulated surplus after tax decreased by ?21 million ($30 million), from ?700 million ($1 billion) to ?679 million ($971 million).

Since Equitas was set up in September 1996, accumulated surplus has increased from ?588 million ($840.8 million) to ?679 million ($971 million).

Equitas' solvency margin, which is accumulated surplus stated as a percentage of net claims outstanding, increased from 9.5 percent to 10.3 percent. Since Equitas began operations, the solvency margin has increased from 5.6 percent to 10.3 percent.

Mr. Stevenson said, "The decrease in surplus is primarily due to technical additions to reserves for a number of categories of business, including a re-estimation of future reinsurance recoveries.

"Notwithstanding the decrease in surplus, however, the solvency margin has risen as a result of the significant fall in net claims outstanding during the year."

Gross claims paid for all types of coverage, which includes claims resolved through commutation agreements, amounted to ?1.4 billion ($2 billion) in the year ended March 31, which dropped from ?2.1 billion ($3 billion) in the previous year.

"The decrease in claims paid reflects not only the gradual reduction in Equitas' claims activity over time, but also the fact that many of the largest claims managed by Equitas have been closed," the company said.