Equitas has confirmed Names could be left to foot the remaining bill if it fails to set enough cash aside for claims, writes Yvette Essen.
The company, which was set up to reinsure and run-off non-life liabilities of Lloyd's syndicates prior to and including 1992, strengthened its reserves for asbestos payouts by £1.7bn to £8bn last week.
Equitas said it was now confident it had sufficient funds for asbestos, pollution and other claims.
But ratings agency Fitch has predicted Equitas will face bankruptcy if the current asbestos claim trend
continues. And if it does become insolvent, its 34,000 private investors, called Names, may be forced to fund the shortfall.
“Fitch is concerned that Equitas and other insurance companies continue to report upward trends in the average cost per claim and the rate at which asbestos claims are being filed,” said insurance director David Wharrier.
“Should these trends continue, they could face bankruptcy.
“The company also has a weaker balance sheet than 12 months ago. Its solvency margin was 11.2% but is now 9.5%, and any run-off with a decrease is a cause for concern.”
Equitas finance director Jane Barker said: “We have tried to use the filing patterns to see how claims come out over the next 40 years.
“As of today, we reckon £200m of claims are being worked on in the office. There is no more money on the balance sheet.”
Equitas spokesman James Burke added: “Policyholders can ask Names to pay what they owe if we have not got any more money. Asbestos is a serious problem, but we have put more money into the kitty to pay for it.
“We are very optimistic overall – but we are not out of the woods yet.”
Chairman of the Lloyd's Names
Association, Chris Stockwell, said: “There is no possibility of Names parting with a penny for as long as Lloyd's is solvent.
“The responsibility to cover the deficiency remains with the market.”