giro conference and exhibition 2011 robert … · introduction what has the working party done? •...

GIRO conference and exhibition 2011Robert Brooks, Andy Whiting, Sophie St John and Rhiannon Seah

© 2010 The Actuarial Profession www.actuaries.org.uk

F10: Update from the UKasbestos working party

11-14 October 2011

IntroductionWhat has the Working Party done?

• Since 2009 market estimate - entered working party passivephase

• Continued to collected survey and government data

• Comparing data against estimates• Comparing data against estimates

• Maintained contact with HSE and Prof. Peto

1© 2010 The Actuarial Profession www.actuaries.org.uk

Agenda

• Experience in 2010

• HSL / HSE latest work

• Legal and Other Developments• Legal and Other Developments

• Next steps


Experience in 2010


Experience in 2010

• Update of Summary Claim data as at 1Q 2011

– Asbestos Related Claims data from 13 companies

• New Claim Recovery Unit (CRU) data as at 2Q 2011

– Mesothelioma data at claim and claimant level


– Mesothelioma data at claim and claimant level

– Male and Female

– EL, PL and Other

– Live, settled and withdrawn

– Non-State, Government and Local Authority

2,500

3,000

Actual vs. Projected Experience 2010Mesothelioma

Number of Claims(excludes nils)

Average Claim Size (£)

(excludes nils)

£100,000

£120,000

-

500

1,000

1,500

2,000

Scenario 23 Actual ¹

5

¹ 1Q 2011 survey data assuming the survey covered 80% and nil rate of 20%

£0

£20,000

£40,000

£60,000

£80,000

Scenario 23 Actual Incurred ² Actual Settled

² Assuming nil claims rate of 20%


£50,000

£60,000

£70,000

350

400

Actual vs. Projected Experience 2010Lung Cancer

Number of Claims(includes nils)

Average Claim Size (£)(includes nils)

£0

£10,000

£20,000

£30,000

£40,000

£50,000

Cost scenario 2 Actual Incurred Actual Settled ²0

50

100

150

200

250

300

Number scenario 2 Actual¹

6

¹ 1Q 2011 survey data assuming the survey covered 80%



1,400

1,600

1,800

Actual vs. Projected Experience 2010Asbestosis



£20,000

£25,000

0

200

400

600

800

1,000

1,200

1,400

Number scenario 2 Actual ¹

7


£0

£5,000

£10,000

£15,000

Cost scenario 2 Actual Incurred Actual Settled ²



700

800

Actual vs. Projected Experience 2010Pleural Thickening



£20,000

£25,000

0

100

200

300

400

500

600

Number scenario 2 Actual ¹

8


£0

£5,000

£10,000

£15,000

Cost scenario 2 Actual Incurred Actual Settled ²


Shift from Asbestosis on post 2010 yearsas well compared to previous surveys


Actual vs. Projected Experience 2010

200

250

300


0

50

100

150

Mesothelioma Lung Cancer Asbestosis Pleural Thickening

£m

Projected (Scenario 23 & Cost 2 / Number 2) Incurred (Grossed up in 1Q 2011 Survey)

Notif ied in 2010 * Settled in 2010 (Grossed up 1Q 2011 Survey)

Claimants to Deaths Ratios - Mesothelioma onlyGrossing up using CRU

• Survey data for UK EL Insurance Market

• Need to allow for:

– Female claimants

– Claims from Northern Ireland


– Claims from Northern Ireland

– Government share of claims

• Female claimants based on detailed survey data

– Much lower propensity to make a claim than males

• Northern Ireland mesothelioma deaths from HSENI (The Healthand Safety Executive for Northern Ireland)

Claimants to Deaths Ratios - Mesothelioma onlyCRU - Government share

14%

16%

18%

20%

22%

24%


0%

2%

4%

6%

8%

10%

12%

14%

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

AWP 2009 CRU 2010 - Employer Liability claims only

Claimants to Deaths Ratios - Mesothelioma onlyCRU – Female (to Male) percentage

5%

6%

7%

8%


0%

1%

2%

3%

4%

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

AWP 2009 CRU 2010 - Employer Liability Non-State claims only

Claimants to Deaths Ratios - Mesothelioma onlyClaimant Death Ratios - Males only

80%

100%

120%


0%

20%

40%

60%

<45 45-54 55-59 60-64 65-69 70-74 75-79 80-84 85+

2007 2008 2009 2010

Claims per claimantMesothelioma only

2.2

2.4

2.6

2.8

Nu

mb

er

of

cla

ims

per

cla

iman

td

eath


1.0

1.2

1.4

1.6

1.8

2.0

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Nu

mb

er

of

cla

ims

per

cla

iman

td

eath

2009 - Scenario 23 2011 Data

HSL / HSE latest work


HSE update

• New report produced by the HSL published in July 2011

• Contents of the report:

– Female deaths projections

– Develop alternative models for male projections:– Develop alternative models for male projections:– Revised Risk Model

– Two-Stage Clonal Expansion model


HSL 2011 projectionsFemale projections – based on HSL 2009 model

300

350

400

450

500

Nu

mb

er

of

GB

fem

ale

me

so

the

lio

ma

de

ath

s


0

50

100

150

200

250

1968 1971 1974 1977 1980 1983 1986 1989 1992 1995 1998 2001 2004 2007 2010 2013 2016 2019 2022 2025 2028 2031 2034 2037 2040 2043 2046 2049

Nu

mb

er

of

GB

fem

ale

me

so

the

lio

ma

de

ath

s

Actual Deaths (all ages) HSL 2011 F1 - (Ages 20 to 89)

HSL 2011 projectionsFemale vs. Male projections

1,500

1,750

2,000

2,250

Nu

mb

er

of

GB

me

so

the

lio

ma

de

ath

s


0

250

500

750

1,000

1,250

2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030 2032 2034 2036 2038 2040 2042 2044 2046 2048 2050

Nu

mb

er

of

GB

me

so

the

lio

ma

de

ath

s

HSL 2009 Non-clearance (Males) - (Ages 20 to 89) HSL 2011 F1 (Females) - (Ages 20 to 89)

HSL 2011 projections - MalesComparison to prior HSL projections

1,250

1,500

1,750

2,000

2,250

Nu

mb

er

of

GB

ma

lem

es

oth

eli

om

ad

ea

ths


0

250

500

750

1,000

1,250

1968 1971 1974 1977 1980 1983 1986 1989 1992 1995 1998 2001 2004 2007 2010 2013 2016 2019 2022 2025 2028 2031 2034 2037 2040 2043 2046 2049

Nu

mb

er

of

GB

ma

lem

es

oth

eli

om

ad

ea

ths

HSL 2009 Non-clearance - (Ages 20 to 89)HSE 2005 Non-clearance - (Ages 20 to 89)HSL 2011 Revised risk model R1 - (Ages 20 to 89)HSL 2011 TSCE T2 - (Ages 20 to 89)Observed deaths (all ages)

Two-Stage Clonal Expansion (TSCE) ModelOverview

• First proposed by Moolgavkar and Kudson in 1981

• Motivated by biological considerations

• Model assumes that cell undergoes two mutations prior todevelopment of a tumour:

Healthy CellIntermediate

CellMalignant

CellTumour


Initiation

Promotion

MalignantTransformation

Growth

Asbestosexposure

Two-Stage Clonal Expansion (TSCE) ModelModelling steps

Lung burdenDose

responseequations

HazardFunction

Classification of the population


equations

Two-Stage Clonal Expansion (TSCE) ModelModelling steps - Classification

• Population is classified between high and low exposed

– Occupational vs non-occupational exposure

• High exposed are sub-classified based on:• High exposed are sub-classified based on:

– Age at which exposure started

– Duration of the exposure


Two-Stage Clonal Expansion (TSCE) ModelModelling steps – Lung Burden

• Lung Burden:

– Measure of the amount of Asbestos fibres in an individual’slungs

• Use of UK Asbestos imports to estimate the lung burden

Main parameters:

– Clearance of the lungs

– Stock removed and released

– Risk factor of one type of fibres relative to another one


Two-Stage Clonal Expansion (TSCE) ModelModelling steps – Hazard Function

• Hazard Function

– Probability of developing a tumour

– Lag of 10 years assumed between tumour and death

– Derived from the dose response equations– Derived from the dose response equations

– Applied to the GB male population


Two-Stage Clonal Expansion (TSCE) ModelResults / Observations

Modelled deaths by age group

14%

16%

18%

20%

Pro

po

rtio

no

fp

roje

cte

dd

eat

hs

The TSCE model projects lessdeaths at older age (85+ band) thanthe HSL 2009 model.


0%

2%

4%

6%

8%

10%

12%

0-15 16-19 20-44 45-54 55-59 60-64 65-69 70-74 75-79 80-84 85-89

Pro

po

rtio

no

fp

roje

cte

dd

eat

hs

TSCE 2011 HSL 2009

1.000

10.000

Death

sra

teper

100,0

00

(logscale

)Two-Stage Clonal Expansion (TSCE) ModelResults / Observations

Death rate per 100,000 for the 1960 - 1964 birth cohort

0.001

0.010

0.100

20 25 30 35 40 45 50 55 60 65 70 75 80 85

Death

sra

teper

100,0

00

(logscale

)

Age cohort

Actual TSCE 2011 HSL 2009


The TSCE model’s projected death ratesare lower for the later birth cohorts inparticular for the 1960 cohort.

Two-Stage Clonal Expansion (TSCE) ModelSummary

Pros:

• Good fit to the historical data

• Based on biologicalconsiderations

Cons:

• Lots of parameters (morethan population model) –difficult to parameteriseconsiderations

• More flexible as a result of itsmany parameters

• Allows different death rates

• Takes into account exposureexplicitly

• May underestimate thenumber of deaths from 80+year olds

• Sensitivity to the post-1980exposure level


HSL 2011 projections - MalesComparison to AWP 2009 projections

1,250

1,500

1,750

2,000

2,250

2,500

Num

bero

fGB

malemes

othe

liomade

aths


0

250

500

750

1,000

1,250

2009 2011 2013 2015 2017 2019 2021 2023 2025 2027 2029 2031 2033 2035 2037 2039 2041 2043 2045 2047 2049

Num

bero

fGB

malemes

othe

liomade

aths

HSL 2011 TSCE T2 AWP 2009 Adjusted HSL model

AWP 2009 Latency model AWP 2009 Alternative birth cohort model

Legal and Other Developments


Legal and Other Developments

• EL trigger

– Does Bolton apply to EL policies?

• Sienkiewicz and Willmore

– Does Fairchild apply?– Does Fairchild apply?

• Scottish damages

– Are claims now more expensive?

• Pleural plaques

– An update on all UK territories and Supreme Court ruling


EL Trigger LitigationBolton and Consequences

• Bolton v MMI, 2006 (Public Liability Case)

– Injury Occurring = Mesothelioma victim sustains injury whentumour starts to develop, 10 years before manifestation

• 4 insurers with EL policies worded in a similar way to the PL• 4 insurers with EL policies worded in a similar way to the PLpolicy in Bolton

– Responded if the injury was sustained or contracted duringthe term of the policy

– They declined EL claims on the Bolton principle

• Led to ‘black holes’ in insurance cover


EL Trigger LitigationRound One

• Claims against the 4 insurers pursued Trigger Litigation

• Burton J held that “injury sustained or disease contracted”wording = liable when fibres inhaled

• Pragmatic commercial view of EL policies:• Pragmatic commercial view of EL policies:

– rejected technical legal arguments

– acknowledged that the insurance industry had traditionallypaid such claims on an exposure basis for over 50 years

• Accepted Injury didn’t occur at point of inhalation

– Approximately 5 years before symptoms


EL Trigger LitigationCourt of Appeal

Rix LJ Burnton LJ Smith LJ

Overturned High Court JudgementSome principles agreed:

• “Sustained” = Policy in force when starts to develop

• “Contracted” = Policy in force at exposure (“caused”)

Rix LJ

• Contracted whencaused

• Mesothelioma notsustained oninhalation

• Policies from 1972respond if causedduring policy

Burnton LJ

• Insurers entitled tochange practices asMesotheliomabetter understood

• Bound by Bolton

Smith LJ

• Policies should beinterpreted onunderstanding ofparties when written

• Not Bound byBolton

© 2010 The Actuarial Profession www.actuaries.org.uk33

EL Trigger LitigationWhat now?

• If Rix LJ not bound by Bolton:

– Actionable injury from date of inhalation

– Liability created when employer materially contributed to therisk

– Decision led to “an unfortunate conclusion”

34

– Decision led to “an unfortunate conclusion”

• Troubling for the Market:

– Public Authorities need provision for 1974 & prior

– Private Sector Businesses will have to meet their ownliabilities if pre-1972 sustained policy

– Insurers and defendants will need to fill ‘black holes’ underjoint & several


Sienkiewicz & WillmoreReminder of Fairchild

• Special rule for cases brought by persons who contractmesothelioma

• House of Lords Decision (Fairchild v Glenhaven FuneralServices Ltd) in 2002

– Joint & Several = ‘materially increases the risk’

• Relaxes the usual requirement:

– More likely than not that harm caused by the defendant

• Medical Science cannot determine which fibre(s) caused themesothelioma to develop


Sienkiewicz & WillmoreSienkiewicz v Grief

• Karen Sienkiewicz daughter of Enid Costello

• Mrs Costello died of Mesothelioma

– 21 January 2006, Aged 74

• Worked for Grief (UK) Limited• Worked for Grief (UK) Limited

– Found to have wrongly exposed her to asbestos

– ‘very light’ exposure - Increased her exposure by 18%

• Initial verdict:

– Fairchild did not apply

• Reversed by Court of Appeal


Sienkiewicz & WillmoreKnowsley Metropolitan Borough Council v Willmore

• Mr Barre Willmore husband of Diane Willmore

• Mrs Willmore died of Mesothelioma

– 15 October 2009, aged 49

• Found to have been exposed to asbestos at her secondary• Found to have been exposed to asbestos at her secondaryschool

• Judge applied Fairchild

– Awarded damages of £240,000

• Decision upheld by the Court of Appeal


Sienkiewicz & WillmoreResults and Impact of Sienkiewicz and Willmore

• Supreme Court - Fairchild still applies when only one defendantas well as environmental exposure

• It may now be easier to establish liability

• Implication for insurers• Implication for insurers

– PL / uncompensated claims compensated occupationalclaims

– Potential knock-on effect to lung cancer claims


Scottish Damages

• Damages (Scotland) Act 2011 - Royal Assent in April

– In force from 7 July 2011

• Consolidation of existing laws

• Replaces the 1976 Act• Replaces the 1976 Act

– Doesn’t affect proceedings brought before it’s in force

• Consequences in relation to loss of support claims:

– Increase in awards for loss of support claims;

– Higher awards for past loss of support; and

– Wider category of claimants entitled to claims.


Pleural plaquesBefore Supreme Court judgement

Scotland

• Scottish Parliamentintroduced a bill toreverse the House of

Northern Ireland

• Northern IrelandParliament introduced abill to reverse the House

England and Wales

• Former ClaimantsPayment Schemeclosed on 31st July 2011

House of Lords ruled pleural plaques were not compensable (Oct 2007)

reverse the House ofLords ruling in Scotland– Act in force from June2009

• Insurers’ appeal to TheScottish Court ofSession rejected

• Supreme Court ruling12 Oct 2011

bill to reverse the Houseof Lords ruling inNorthern Ireland

• Received Royal Assenton July 2011

• Attorney General forNorthern Irelandreferred the NIlegislation to theSupreme Court

closed on 31st July 2011• No further court action

pending• Potential for Forum

shopping


Pleural plaquesSupreme Court judgement

• The Supreme Court dismisses the insurers appeal

– All seven Lords in agreement

– “judgment of the Scottish Parliament was not withoutreasonable foundation”reasonable foundation”

– Accepts that the 2009 Act pursues a legitimate aim

– Should respect the judgment of the elected body and notoutside the legislative competence of the Scottish Parliament


Pleural plaquesSupreme Court judgement

• Reasonably proportionate to the aims sought to be realised as:

1) Claims can only be brought if asbestos exposure wascaused by the employer’s negligence;

2) Insurers obligation to indemnify inevitably entailed a risk that2) Insurers obligation to indemnify inevitably entailed a risk thatunforeseen circumstances would increase the burden oftheir liability; and

3) Preserving the status quo prior to the Rothwell judgement.

• No verdict on quantum

• Appeal to EU?


Key points and Next steps


Key points

• Two years of experience little cause for changes

– Mesothelioma number of claims and costs in-line withestimate (Claimants to Deaths Ratios are stable)

– Shift between Asbestosis and Pleural Thickening claims– Shift between Asbestosis and Pleural Thickening claims

• Claim to claimant ratio is higher than the 2.0 assumed

• Government share lower than 20% estimated

• TSCE projections close to those using the 2009 latency model

• Pleural plaques & EL trigger - Still uncertain


What will the AWP do now?

• Release a excel copy of the TSCE model

• Continue to collect market data on a yearly basis

– Next due for March 2012


Questions or comments?

Expressions of individual views by membersof The Actuarial Profession and its staff areencouraged.

The views expressed in this presentationare those of the presenter.


giro conference and exhibition 2011 robert … · introduction what has the working party done? •...

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