The Kansas City, Mo.-based NAIC backed up the industrys concerns over S. 1125 in a letter to Senate Majority Leader Bill Frist, R-Tenn., which noted the increasing cost of the legislation.

The letter was signed by Arkansas Commissioner Mike Pickens, who is the NAICs president, and Texas Commissioner Jose Montemayor, who chairs the Property & Casualty Insurance Committee.

“What began as a $108 billion trust fund with insurers responsible for funding $45 billion is now a $153 billion fund, including contingent funding, with insurers bearing $74.5 billion plus potentially unlimited back-end funding,” the letter said.

For U.S. insurers, the letter said, this level of funding implies an increase in net reserves of 449 percent for asbestos as of year-end 2002, where they were posted at $16.6 billion.

“This is dangerously unaffordable for the industry,” the letter said. “For many of the foreign insurers and reinsurers doing business in the United States, the story is the same.”

“An insolvent insurer cannot pay claims related to asbestos or any other claims that might be presented to it,” the letter added.

The letter urged the Senate to consider several points as it continues its deliberations on asbestos.

First, the letter said, evaluations of those seeking compensation should be based on objective medical criteria.

In addition, the letter said, any trust fund should be financed by business and the insurance industry in an equitable manner that reflects relative asbestos exposure, past and future, as well as ability to pay.

Finally, the letter said, any trust fund must contain all asbestos claims, pending and future, and provide for certainty and finality.

NAIC, the letter said, urges Congress to take action to assure relief to current and future victims of asbestos-related diseases.

“To do this, an equitable and affordable funding mechanism must be developedone that does not disadvantage or overwhelm the insurance industry which will ultimately adversely impact policyholders,” the letter said.

Leigh Ann Pusey, senior vice president of federal affairs for the Washington-based American Insurance Association, said that AIA is talking to members of the Senate about one of AIAs primary objections to S. 1125, which is its failure to create an exclusive remedy for asbestos-related claims.

She noted that an amendment approved by the Senate Judiciary Committee created a “Swiss cheese” system in which some claims could fall through holes and find their way into the tort system.

AIA, Ms. Pusey said, is emphasizing that it still needs a bill and that insurers are open to other approaches.

She acknowledged that Senate Judiciary Committee Chairman Orrin Hatch, R-Utah, is in a tough position in the effort to find a consensus.

Indeed, some in the labor community argue that the legislation does not go far enough in compensating asbestos victims.

“It was never going to be easy,” Ms. Pusey said. But she said that all the players who were at the table during the drafting of S. 1125 are still there, and all still want a bill.

While it will be difficult, Ms. Pusey said, she can still see the possibility of developing a bill that can get 60 votes, the amount needed to avoid a filibuster.

Anne Sittmann, a representative of the Des Plaines, Ill.-based National Association of Independent Insurers, said that during the recess, Senate staffers will be meeting with interested parties to try and find the most viable way to an agreement.

NAII, she said, believes there must be substantial and substantive changes in the legislation before it is brought to the floor. But NAII, she added, is continuing to stress the urgency for effective reform legislation.

David Farmer, senior vice president of federal affairs for the Downers Grove, Ill.-based Alliance of American Insurers, said that as a result of industry meetings, a good number of senators and their staffs understand the position of the insurance industry.

These meetings, he said, will continue throughout the Congressional recess. Mr. Farmer noted that prior to the industry meetings, there was not a clear understanding of the economics of asbestos litigation or the impact of the amendments added to S. 1125.

Mr. Farmer said achieving a consensus will be difficult, “but you never say never.”

Still, he said, when looking at the groups that are currently opposing S. 1125, including insurers, the AFL-CIO and trial lawyers, it is hard to see in which direction Sen. Hatch can move to find a consensus.

Monte Ward, vice president of federal affairs for the Indianapolis-based National Association of Mutual Insurance Companies, said that the industry is looking at other options.

If the industry cannot negotiate to the point where it can support a viable bill, he said, it could look at something such as a straight medical criteria proposal.

This type of legislation would simply establish defined medical criteria for those filing asbestos claims and would not have a trust fund associated with it.

Thus far, Mr. Ward said, senators and staffers contacted by NAMIC members have been very willing to listen, but they have not been willing to commit themselves to a straight medical criteria approach.

But he said he doubts that asbestos legislation can move in its current form.

Reproduced from National Underwriter Property & Casualty/Risk & Benefits Management Edition, August 4, 2003. Copyright 2003 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.