Insurance Industry Asbestos Crisis

Insurance Industry

Situation

The Asbestos health claims crisis caused the need for the Insurance Industry to address the problem in unison. Legacy policies for many industrial companies were written by several Insurers clouding who and which policy covered individual claims.

The potential liability was not known but was feared to be the largest Insurance Industry liability in History.

The Industry created a Consortium Group to define the issues and assess how to approach the resolution.

The President of the Consortium engaged LoBue Group to lead the evaluation of the Liability dimensioning and to design and implement a operating facility to prototype resolution processes.

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Recommendations

Conduct a detailed Policy review and build a model to assess the extent of possible claims by policy and by timeline to determine the liability over the expected life of the claims.

Design a prototype processing center to test and develop resolution processing and remediation practices best suited to minimalizing the cost of resolution.

Provide an array of possible outcomes for review with the Industry leaders to decide on a specific course of action.

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Results

LoBue completed an extensive correlation and regression analysis and model development showing the time and cost of remediating the expected claims on a yearly basis and variable assumptions on aggressive resolution vs defensive resolution timelines.

A prototype processing facility was implemented and selective claims were processed through the facility to gain insight into the expected broarder liability processing costs and time to remediation of 90% of the expected cases.

The LoBue analysis showed that an aggressive approach to remediation would dramatically increase liability payments in the short time. This would quickly overwelm total Industry reserves and create a liquidity crisis.

LoBue recommended and the Consortium accepted a standardized process for claims handling and liability sharing. Along with this it was determined that a cautious approach to Remediation was necessary to spread the timeline of settlements and better understand the reality of the "Real Liability".

The Consortium facility was eventually disbanded when all analysis was completed and underlying issues were fully understood.

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