Ace has been forced to boost its asbestos and environmental reserves by £2.18bn.

The move added a $354m (£216m) after-tax charge to its fourth quarter accounts, but the insurer vowed to beat analysts' expectations.

Earnings figures for the quarter are to be announced on 5 February.

The company estimated that excluding the charge, operating income for the period would hit 92 cents a share and net income would hit 67 cents a share.

Analysts had forecast operating income of 89 cents per share.

The cost of the reserving action was offset by $1.86bn (£1.13bn) of reinsurance including $533m (£325m) from the National Indemnity Company, a subsidiary of Berkshire Hathaway.

Ace took on extra asbestos liabilities following its purchase of insurer Cigna in 1999.

Ace was put on negative ratings watch by Standard & Poor's. The ratings agency gives Ace an A-minus/A-minus 2 counterparty credit rating and an A-plus counterparty credit and financial strength rating.

But investors were not put off and helped the share price to close up 5.6% at $29.27 on Monday.