Equitas has admitted it may have to increase its reserves for the second time in the past two years, to meet rising asbestos claims from the US.

But the reinsurance vehicle for pre-1992 Lloyd's claims has denied growing rumours that it is teetering on the verge of proportional insolvency.

An Equitas spokesman said last week: “It will be likely we will have to further strengthen our asbestos reserves for the six-month period to September 30, 2000.”

His admission came after Equitas had to increase its reserves by £711m for the year ending March 31, 2000.

The Lloyd's Names' Association (LNA) reported recently that the number of asbestos-related claims filed with Equitas had leapt by 100,000 to 550,000 since last March.

In addition, the early months of 2001 have seen a sharp rise in the number of asbestos companies filing for Chapter 11 bankruptcy protection in the US.

“Names are certainly worried that the increase in asbestos liabilities

may trigger the proportional insolvency of Equitas either later this year or in 2002,” said LNA chairman Chris Stockwell.

Proportional insolvency would mean the reinsurance vehicle would offer to pay only part of its outstanding £7bn claims.

Lloyd's would be forced to make up the shortfall from its central fund or by an additional levy on its corporate members and possibly the 34,000 Names with pre-1992 liabilities.

However, the Equitas spokesman sought to calm fears by pointing out that the vehicle was still paying out 100% of its claims.

He added that, after taking into account reinsurance recoveries and investment income, Equitas declared a net gain of £12m for the year to March 31, 2000.

Stockwell was sceptical that an actuarial review under way for Equitas would discover how much additional reserving was needed.

“I am quite clear that Equitas can no longer calculate its total asbestos liabilities, and any figure it produces will be a fudge because of the huge uncertainty created by the rise in US companies seeking Chapter 11 protection,” he said.

Equitas will announce the reserving figure when it releases its results for the year ending March 31, 2001 in July.