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The 2004 GIRO Conference UK Asbestos Working Party

The 2004 GIRO Conference UK Asbestos Working Party. 12-15 October 2004, Hotel Europe, Killarney. UK Asbestos Working Party. What’s the plan ? What have we done? Main observations Some information about asbestos A bit about the HSE mesothelioma model A bit about our model

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The 2004 GIRO Conference UK Asbestos Working Party

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  1. The 2004 GIRO ConferenceUK Asbestos Working Party 12-15 October 2004, Hotel Europe, Killarney

  2. UK Asbestos Working Party What’s the plan ? • What have we done? Main observations • Some information about asbestos • A bit about the HSE mesothelioma model • A bit about our model • Recent experience / current developments • Brief US update • Workshop / copies of our model(s) • Andrew Darnton / Senior Statistician HSE

  3. What have we done ? • Lots !! • Definitive reference source on UK asbestos • Collected industry-wide UK asbestos data • Surveyed practitioners about methodology • Replicated HSE model • Extend HSE-type model to other diseases/costs • Projected UK industry-wide costs • Practical spreadsheet model & benchmarks

  4. Headline observations from the paper • Future cost to UK insurance industry is £4-10b • Over half of this relates to mesothelioma • Mesothelioma projections very uncertain • Future numbers very dependent on the over 80’s • Asbestosis numbers peaking ? • Pleural plaques mushrooming • Poor data capture and limited disclosure • Continued worldwide use

  5. Some information about asbestos • Types of asbestos • Use of asbestos • Types of disease

  6. Types of asbestos • Chrysotile: “White asbestos” (Serpentine minerals) • Amosite: “Brown asbestos” (Amphibole) • Crocidolite: “Blue asbestos” (Amphibole)

  7. Types of asbestos: white

  8. Types of asbestos: brown

  9. Types of asbestos: blue

  10. Types of asbestos

  11. Types of asbestos: fibres

  12. Types of asbestos • Cue samples

  13. Uses of asbestos • Insulation (pipes and boilers) • Fire-proofing (fire doors) • Asbestos cement (roof and wall cladding) • Friction materials (brake linings) • Textiles (clothes, fire blankets) • Other !! (socks, phone boxes, gas masks, cigarette filters, gaskets on space shuttle, broomstick in Wizard of Oz)

  14. Types of asbestos / uses • Cue Video Clip 1

  15. Types of disease • (Pleural plaques) • Pleural Thickening • Asbestosis • Lung Cancer • Mesothelioma

  16. Types of disease • Cue Video Clip 2

  17. A bit about the HSE model

  18. A bit about the HSE model

  19. A bit about the HSE model

  20. A bit about our model • Mesothelioma based on HSE model • Asbestosis based on exposure / latency model • Lung cancer based on HSE model / judgement • Pleural plaques based on hand-waving • Average costs based on survey data / judgement • Average cost inflation based on survey data / judgement and age-adjusted allowance • Overall “level” based on survey data (£1.3b paid)

  21. Recent experience

  22. Current developments • CAWR regulations: May 2004 • T&N / RSA court case(s) • T&N pension scheme / Federal-Mogul • Pleural Plaques test case: 8/11/04 • Continued worldwide consumption

  23. Brief US update • Recent US claims experience • Increases in insured costs • Update on the “FAIR” Act • Recent legislation / developments

  24. Recent US claims experience • Number of claims continues to grow • Average size of awards has increased • Number of defendants grown lots (~ 8,400) • Number of companies filing for bankruptcy has also grown (now in excess of 70)

  25. Recent US claims experience

  26. Recent US claims experience • 730,000+ claimants filed to date • Estimate ultimate number 1-3m • Manville Trust 100,000+ claims filed in 2003 • Most of increase from unimpaired lives • Increase in ultimate or just an acceleration? • Claim filings in 2004 show sharp decline

  27. Increases in insured costs • Coverage block expansion • Reclassification of products claims as non-products claims • US carriers increased Gross reserves by $12b+ since the start of 2003 (Net $8b+) • Follows significant increases in 2001 and 2002 • Equitas increased its reserves by £0.3b for the year ending 31 March 2004

  28. Update on the “FAIR” Act • No-fault “trust fund” • Remove claims from tort system • Privately funded, companies and insurers (US and non-US) • Defined set of medical criteria and award levels • Considerable disagreement over fund size and who contributes what • Concerns if the fund runs out of money - sunset clause means claims revert to tort system

  29. Update on the “FAIR” Act • Not all key stakeholders supported: Labor, Unions, Democrats, Plaintiff Attorneys • Insurance community divided • Cloture vote failed 22 April 2004 • Negotiations have continued but significant compromises are still needed • Size of fund converging around $140b • Disagreement over pending claims, funding levels and return to tort system • So continue to watch this space ….

  30. Recent Legislation / Developments • May 2004: Ohio first state to establish medical criteria (subject to a referendum in November) • June 2004: Mississippi tort reform: limits on where can sue, cap damages, protects some

  31. Workshop / copies of our model(s) What’s the plan ? • Discussion of the HSE model • Our model and industry estimates • Recent experience and our survey • Court cases - and potential impacts • Questions/discussion on the paper • Model(s) from www.actuaries.org.uk or e-mail julianlowe@norwich-union.co.uk

  32. Andrew Darnton : Senior Statistician/HSE

  33. The expected burden of mesothelioma in Great Britain from 2002 to 2050 By JT Hodgson, HSE DM McElvenny, HSE AJ Darnton, HSE MJ Price, HSE J Peto, LSHTM

  34. Previous predictions of mesothelioma deaths in GB • Published in 1995 (Peto et al) and 1997 (Hodgson et al) • Based on simple birth cohort model • Suggest peak of 2700 to 3300 deaths around 2020 • Data conformed to this model well up to 1991, but departed from it thereafter (visual inspection, confirmed by modelling – see later)

  35. Age-specific death rates for 5-yr birth cohorts from 1878 to 1937 - risk increasing

  36. Age-specific death rates for 5-yr birth cohorts from 1938 to 1982 - risk decreasing

  37. Modelling approach (1) • Adopts HEI/Peto model: an individual’s additional meso risk caused by single year’s exposure is proportional to exposure in that year multiplied by the 2nd or 3rd power of time since the exposure lagged by 10 years • Assumes effect of successive years are additive • Assumes individual exposure can be adequately approximated by the product of 2 factors, one defined by year (DT), the other by age (WA)

  38. Modelling approach (2) • Choose factor values, DT and WA (and k) to achieve best fit to observed mortality for males 1968-2001 aged 20-89 • The implied exposure (given by the factor DT) reduced rapidly after a peak in the mid-1960s, but estimates become increasingly uncertain, and effectively undetermined (under this model) from the early 1980s onwards • Assumed from indirect evidence that exposure from 2000 was 4% of peak and by 2050 will be 0.75% of peak (RIA for recent regs)

  39. Poisson regression modelling • Two alternative models pursued • No clearance model (half-life assumed 1000 years) • Clearance model (half-life of 15 years – from Berry’s modelling of Wittenoom workforce) • Model adequacy examined via deviance residuals and by comparing observed versus fitted deaths

  40. Results of modelling

  41. Age-cohort model • Fit significantly worse than models with more parameters • However, two possible alternatives with similar fits, but different future implications • Which is closest to the truth?

  42. Model parameters (1)

  43. Model parameters (2)

  44. Model parameters (3)

  45. Differences between models • One key difference (apart from clearance/non-clearance distinction) is that they imply different time paths for population exposure to asbestos. Profiles similar up to 1950. • One way of assessing which is best is to compare their implied exposure patterns with the actual patterns of asbestos imports, taking account of differences between fibre type.

  46. Pattern of fibre-specific imports scaled to same maximum for comparison purposes.

  47. Fitted import index for non-clearance and clearance models with best approximate weighting of actual imports

  48. Model Preference • Better correspondence between implied exposure pattern and imports data for no-clearance model? • Data for the year 2001 is a more significant outlier in the clearance model than the no-clearance model. • Slight (but not definitive) preference for non-clearance model!

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