EQUITAS, the pool of funds set up to pay billions of pounds of old liabilities at Lloyds of London, will today announce a $415 million (£222 million) settlement over asbestos liabilities from Babcock & Wilcox, the US industrial boiler maker.
The deal removes Equitass last large asbestos exposure. Babcock & Wilcox, which is currently in Chapter 11 bankruptcy protection, used the deadly fibres to insulate its giant boilers.
Since 1996 Equitas has paid out more than $7 billion in asbestos settlements and £16 billion in total claims. The settlements allow Equitas to cut off its liability to the policyholder and to reduce the funds costs.
This is at least a years work, said Scott Moser, chief executive of Equitas. A settlement is a favourable outcome [because] wed rather pay claims than lawyers.
Mr Moser said that by paying a lump sum to remove one of its largest exposures, the risk to the whole fund had been reduced. Such settlements are also known as policy buyouts or buybacks.
Mr Moser said: Every time youre able to put one of your biggest ones to bed at a price you can afford, you reduce the residual risk of having a claim you cant afford.
It was the first settlement that the fund had negotiated directly with representatives of asbestos victims, rather than with a company itself.
Equitas was created in 1996 to cover the huge liabilities that Lloyds insurers accumulated in the 1960s, when asbestos use was rife, and the 1980s, when insurers were hit by a series of natural disasters.
Estimates for the total bill facing the fund have been as high as £42 billion.
In the past two years the fund has agreed 11 major asbestos settlements worth $2.2 billion (£1.7 billion), including pacts with big construction groups such as Honeywell and Halliburton.
MAJOR EQUITAS SETTLEMENTS SINCE 2003
April 2003: Honeywell, $472m (£252m)
January 2004: Halliburton, $575m (£307m)
March 2004: Travelers, $245m (£131m)
July 2004: Enpro Industries, $118m (£63m)
August 2004: Hercules, $97m (£52m)
January 2005: Four policyholders, $200m (£107m)
February 2005: American Standard, $85.5m (£45m)
March 2005: Babcock & Wilcox, $415m (£222m)