UK Asbestos: the Definitive Guide (2004)
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UK ASBESTOS - THE DEFINITIVE GUIDE Working Party: Brian Gravelsons, Wendy Hawes, Sylwia Jakubowski, Anthony Kent, Julian Lowe (Chairman), Andy Macnair, Darren Michaels, Anita Morton, David Sanders, Philip Towell, Andy Whiting, James Widdows, Anthony Williams Keywords: “asbestos”, “asbestosis”, “mesothelioma” Summary: The estimated future cost to the UK insurance industry of asbestos-related claims is £4- £10b. Well over half of this relates to mesothelioma claims, numbers of which are predicted to continue to rise for the next ten years. By contrast, claims for other asbestos-related diseases, such as asbestosis, are expected to fall in the coming years, as the number of claims mirrors the declining use of asbestos since the 1970s. Most estimates of the future number of mesothelioma claims are based on the latest (2003) HSE projections. We have reproduced the HSE projections in a spreadsheet model to help practitioners understand the HSE model. This highlights the sensitivity of the projections to a number of key parameters. In particular, the future number of mesothelioma deaths is very dependent on how the disease continues to develop at older (80+) ages, with over half of all claims being in respect of those aged over 80 by the year 2020. The future number of mesothelioma deaths could easily be considerably higher or lower than the current projections, depending on the experience of this age group. We suspect that the variability of the HSE projections is greater than most practitioners who use the model would currently assume to be the case. In producing our estimates, we have used data collected via an anonymous survey from all major UK insurers, representing the majority of the UK market. We have also developed a simplified model of the emergence of asbestos-related diseases, to help project claim numbers for non-mesothelioma diseases. Our data survey has highlighted a range of practices in recording relevant information regarding asbestos-related claims. With such potentially large numbers at stake, the insurance industry would do well to improve its ability to record relevant information electronically. The range of potential outcomes for the cost to the insurance industry highlights the difficulty in assessing, let alone pricing, latent disease claims. This lends weight to the argument for potentially “separating” these types of claim from non-disease claims for the purpose of providing Employers’ Liability insurance. As well as our projections, the paper describes the main types of asbestos and asbestos- related diseases, health and safety regulations, claims handling protocols and relevant court cases. We’ve also reviewed information regarding the use of asbestos in the UK and around the world, other relevant data sources and given a brief overview of asbestos-related developments in the US. UK ASBESTOS - THE DEFINITIVE GUIDE CONTENTS Section 1. Introduction 1.1 Overview of the paper 1.2 Suggested sections for the reader-in-a-hurry 1.3 Where to find the spreadsheet model(s) 1.4 Thanks 1.5 What the paper is not 2. Background 2.1 Types of asbestos 2.2 Types of asbestos-related disease 2.3 Use of asbestos in the UK 2.4 Health & Safety regulations 2.5 Medical factors 3. Insurance-related developments 3.1 Policyholders Protection Board 3.2 Claims handling agreements pre-Fairchild 3.3 Fairchild and the mesothelioma claims handling guidelines 3.4 Chester Street 3.5 Other claims handling protocols 4. Socio-economic developments 4.1 Legal developments 4.2 Cape 4.3 Turner & Newall 4.4 Scan vans 4.5 UK companies and organisations affected by asbestos 4.6 The Helsinki Criteria 4.7 DWP compensation 4.8 Worldwide use of asbestos 4.9 Worldwide regulations regarding asbestos 4.10 Asbestos compensation around Europe 5. Previous claim projections and available data 5.1 The main projections of British mesothelioma deaths 5.2 Peto et al 1995 paper 5.3 Peto et al 1999 paper 5.4 HSE 2003 paper 5.5 British Medical Journal 2004 paper 5.6 EL premium data as a proxy for exposure 5.7 ABI data 5.8 DWP data 5.9 HSE data 6. Our survey says…. 6.1 Introduction 6.2 Questionnaire about the data 6.3 Results from analysing the data 6.4 Questionnaire about reserving/projection methods 7. Estimated insurance industry costs 7.1 Introduction 7.2 Understanding the HSE 2003 projections 7.3 Our own simplified model 7.4 Derivation of average claims costs 7.5 Combining our survey data with projected future claim numbers 7.6 And the answer(s) is (are) …. 8. Lessons from the US 8.1 Asbestos use and exposure in the US 8.2 A brief history of US asbestos litigation 8.3 Deterioration in the asbestos claims environment 8.4 Estimates of the ultimate cost of US asbestos 8.5 The “FAIR” Act 8.6 Differences between US and UK asbestos 9. Some provocations based on the paper 9.1 Reforming EL insurance 9.2 Better data collection/disclosure 9.3 Prescribed benchmarks/valuation methodologies APPENDICES Appendix I Bibliography, précis and useful web sites I.1 Publications reviewed by the working party I.2 Publications not reviewed by the working party I.3 Précis of some of the papers I.4 Useful web site references Appendix II Worldwide asbestos consumption/production Appendix III ABI mesothelioma guidelines Appendix IV EL market share data IV.1 EL market share data 1981-2003 IV.2 Participation in British Electric pool 1949-1979 Appendix V Copies of surveys/questionnaires 1. INTRODUCTION 1.1 Overview of the paper We have tried to gather together as much information as possible about UK asbestos, particularly as it relates to UK insurers. We start by summarising what asbestos is, the types of disease it can lead to and the development of UK health and safety regulations in section 2. We then look at various insurance-related protocols for apportioning liability and providing compensation when insurers or employers are insolvent in section 3. Section 4 looks at a number of socio-economic aspects of asbestos - in particular a number of relevant UK court cases. This section includes a fair bit of information on two significant UK asbestos employers, Cape and Turner & Newall. It also looks at medical protocols for recognising asbestos disease (The Helsinki Criteria) and the state compensation available for asbestos-related diseases. Although the bulk of the paper relates to UK developments, we look at worldwide asbestos consumption/production and provide a quick overview of worldwide asbestos regulations and the compensation environment around Europe. Section 5 concentrates on reviewing papers that have made projections of UK mesothelioma deaths and describes some of the available data on asbestos claims and exposures. As part of the paper we conducted a survey of practitioners. We asked insurers to provide details of their asbestos-related claims in an “anonymous” fashion that let the working party look at aggregate data but not see any individual company contribution. We also asked a range of insurers, consultants and other interested parties for information about how they currently project asbestos liabilities. The results of the survey are detailed in section 6. In section 7 we describe a number of spreadsheet models we have used to make some industry-wide estimates of the cost of UK asbestos claims. In part these are based on models of the number of mesothelioma claims developed by Professor Peto and the HSE. The projections were calibrated using data provided as part of an industry-wide survey. We have expanded these models to include non- mesothelioma claims and added an estimate of cost as well as numbers of claims. We hope these spreadsheet models give actuarial practitioners a practical tool to assist in making asbestos-related projections. Although our main focus is the UK, developments in the US loom large in any discussion of asbestos, so we have provided an overview of the US asbestos environment in section 8. Finally, we include some thoughts and provocations relating to the insurance of latent claims in the UK in section 9. 1.2 Suggested sections for the reader-in-a-hurry From a little acorn, this paper has developed into a weighty tome… If someone wants to get a general background to asbestos and insurance-related issues in the UK without reading all 200+ pages, can we suggest the following as a useful subset to give a flavour of the main topics in the paper: • Sections 2.1, 2.2 and 2.3 on what is asbestos, types of asbestos-related disease and a chronology of UK use/regulation of asbestos. • Section 4.1 describes some of the main court cases regarding asbestos. • Section 4.3 gives a history of Turner & Newall, the UK’s largest asbestos producer and a thorny legal dilemma it is involved in. • Section 5.1 summarises the main previous estimates of UK mesothelioma deaths. • Sections 7.3 and 7.6 summarise the modelling work we have done and the industry-wide estimates we have produced. We have tried to provide a comprehensive Bibliography in Appendix I, including précis of some of the main papers we have drawn on. 1.3 Where to find the spreadsheet model(s) We hope to make the spreadsheet model we have developed available on the UK Actuarial profession’s web site at www.actuaries.org.uk under the “General Insurance” section. Failing that, interested parties are welcome to contact the Chairman for a copy at [email protected] The model lets an interested reader reproduce the UK market-wide estimates in the paper and produce reprojections based on their own chosen parameters. It can be used as a base to assist insurers, or other interested parties, in making projections of their own asbestos-related liabilities.