A warning that Equitas must strengthen its reserves by £5.69bn to cover big increases in US asbestos claims has come from the United Names Organisation (UNO), writes John Jackson.

This follows reports by AM Best and Tillinghast-Towers Perrin. AM Best says the US insurance industry will be hit by a £46bn asbestos claims bill, two-thirds higher than its previous 1997 estimate of £28.4bn. Tillinghast-Towers Perrin says the bill could reach £142bn, of which 31% (£44bn) could come from overseas insurers, mainly Lloyd's.

UNO chairman Christopher Stockwell said it was clear that neither Lloyd's itself nor Equitas had the resources to cover the £5.69 billion shortfall. In this event, the question is who would pay the shortfall, with Names again looking likely losers.

Names were not reassured by Lloyd's chairman Sax Riley at the recent Lloyd's annual meeting. Stockwell said that at the meeting, Riley was asked whether the ongoing market would cover the deficiency and "declined to give confirmation".

He added: "There have been repeated assurances by Lloyd's that Names will only be liable in a situation where the ongoing market does not cover a deficiency,"

UNO accepts Equitas has substantially improved its funding for asbestos claims from the big profits made on the run-off of the pollution and short-tail accounts since Equitas was formed in September 1996.

James Burcke, Equitas head of communications, said they strengthened asbestos reserves to the year ended March 31, 2000. "We have never disclosed the amount by which we increased asbestos reserves."

Asbestos is included in the £711m by which the reserves were increased that year. Equitas will publish its latest results for the year ended March 31, 2001, this month. Equitas turned in a surplus of £772 million for 1998-1999, up £54m.

The solvency margin increased to 9.6% from 5.6%.