Asbestos
Rita Zona, Deloitte Consulting LLP
September 13, 2004
What is Asbestos?
Asbestos Defined – Natural fibrous silicate mineral formed through crystal
development
Types of Asbestos
• Amphibole Mineral Group
• Long thin rod fibers with a chain-like structure
• Types Include:
• Amosite (Brown Asbestos) – 2nd most common type found in
buildings
• Crocidolite (Blue Asbestos) – Found in specialized high
temperature applications
• Anthophyllite
• Tremolite - Rare and found primarily in other minerals
• Actinolite
• Serpentine Mineral Group
• Layered tubular crystal structure
• Chrysotile (White Asbestos) – Accounts for 90-95% of asbestos in
buildings
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Where is Asbestos Found?
Asbestos Historically Considered “Miracle Mineral”
• Resistant to fire, heat and corrosion
• Strong and flexible
• Easily separated into filaments
• Abundant in nature
• Relative ease of extraction
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Asbestos Applications
Used historically in a wide variety of products, including:
• Insulation (Pipe, boiler, corrugated air-cell, breaching, and block
insulation; HVAC duct insulation; sprayed-in insulation; blown-in
insulation; thermal paper products; electrical wiring insulation)
• Fireproofing/Acoustical Texture Products (includes acoustical
plaster, decorative plaster, textured paint or coatings, fire blankets,
fire curtains, fire doors)
• Textile and Cloth Products (includes blankets, protective cloth
coverings, garments, asbestos gloves, threads, cords, yarns, braids)
• Spackling, Patching & Taping Compounds (includes caulking,
putties, joint compounds, adhesives, tapes, thermal taping
compounds)
• Gaskets and Packing (includes high temperature gaskets, packings
for industrial products, high pressure packing, asbestos packing
reinforced with steel or copper wire)
• Tiles, Wallboard, Siding and Roofing (includes roofing shingles,
roofing felt, base flashing, cement wallboard, cement siding, ceiling
tiles and lay-in panels, asphalt floor tile, vinyl floor tile, vinyl sheet
flooring, flooring backing, vinyl wall coverings)
• Friction Materials (Automotive and railroad brakes and clutches)
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Why is Asbestos a Problem?
Impairments Caused from Exposure to Asbestos “Disease Types”
• Pleural Plaques or Pleural Thickening
• Accumulation of scare-like tissue in the membranes that surround
the lung
• Rarely causes functional impairment
• Asbestosis
• Characterized by shortness of breath and coughing
• May lead to severe respiratory impairment and possibly death
• Lung & Other Cancers
• Tumors in bronchi, throat, larynx, esophagus, stomach, colon and
lymph nodes
• Mesothelioma
• Rare cancer of the thin membranes lining the abdominal cavity
including lungs, diaphragm and heart
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Why is Asbestos an Insurance Issue?
Workers Compensation
• Asbestos claims were initially filed under WC
• WC is a system of incomplete compensation
• Provides Indemnity, Medical, and Expense coverage
• No coverage for Pain & Suffering, Punitive Damages, etc.
General Liability (including CMP, XS Liability, etc.)
• Attorneys began suing asbestos defendants (manufacturers,
distributors, installers, etc.) through the tort system
• Defendants were found liable for not warning of the dangers
• Product Liability vs. Premises & Operations Liability
• Bodily Injury vs. Property Damage claims
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Why is Asbestos an Insurance Issue?
Reasons Why Insurers Struggle to Establish Accurate Reserves
• Uncertain dates of loss (“gradual & continuous exposure”)
• The nature of asbestos data confounds typically accident year
(read: triangular) analysis
• Long latency periods
• Difficulty in establishing cost allocation among insurers
• Often involve mass tort suits, including class actions
• Large damages and punitive damages are often involved
• Increasing number of asbestos company bankruptcies
• The number of asbestos-related claims continues to rise
• The types of defendants is expanding
• Unfavorable coverage interpretations (i.e., Prem/Ops claims)
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Historical Asbestos Reserves
US Insurance Industry Total
45,000
40,000
35,000
$ millions
30,000
25,000
20,000
15,000
10,000
5,000
1999
Net Reserves
2000
Gross Reserves
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2001
2002
2003
Year End
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Net Asbestos Reserves
Top 10 Companies
7,000
6,000
$ millions
5,000
4,000
3,000
2,000
1,000
1999
2000
2001
2002
2003
Year End
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Percentage Change in Net Asbestos Reserve
from Prior Year End
Top 10 Companies
600%
500%
400%
300%
200%
100%
0%
-100%
2000
2001
2002
2003
Year End
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Gross Asbestos Reserves
Top 10 Companies
7,000
6,000
$ millions
5,000
4,000
3,000
2,000
1,000
1999
2000
2001
2002
2003
Year End
Copyright © 2004 Deloitte Development LLC. All rights reserved.
11
Percentage Change in Gross Asbestos Reserve
from Prior Year End
Top 10 Companies
600%
500%
400%
300%
200%
100%
0%
-100%
2000
2001
2002
2003
Year End
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