Insurers are hopeful that legislation that would set up a federal fund for those suffering from asbestos-related illnesses could be approved by US legislators and signed into law by President George W. Bush before the end of the year.

The US court system is in a state of near-crisis on the back of hundreds of thousands of asbestos-related cases flooding the system, and leading to a cry from trade unions, corporations and industry groups for reform to the way cases are heard. Critics of the system have said that presently lawyers as well as those not actually suffering from asbestos-related illnesses are benefiting from excessive court awards at the expense of those who are genuinely afflicted as a result of exposure to the fireproofing and insulation product widely used in US home construction and commercial building projects up to the 1970s.

However, an industry representative said proposed legislation currently on the table - Fairness in Asbestos Injury Resolution (FAIR) Act (S.1125), which calls for the set up of a fund holding up to $153 billion to pay asbestos claims, and which has already been approved by the US Senate Judiciary Committee - will need a complete "overhaul" if it is to have any real impact.

Julie Roachman, senior vice-president of public affairs at the American Insurance Association (AIA), yesterday told The Royal Gazette that the system was in urgent need of fixing with the high number of asbestos-related claims having a drag affect on nearly every sector of the economy.

She said that although many former asbestos manufacturers had gone bankrupt over the controversy, other business sectors had been left with significant exposure to asbestos liabilities.

Although insurers are one of the groups affected, they are not the only ones that stand to be impacted.

Such mainstream corporations as Campbell's Soup, Proctor & Gamble and The Wall Street Journal were reported by the AIA as having asbestos liabilities on their books.

Insurance has been hard hit however with a number of top companies - including Bermuda-based insurance giant ACE Limited - posting significant reserve increases in recent months in anticipation of the possibility of future claims.

The AIA - which claims to be the leading property & casualty (P&C) trade organisation with its representation of more than 400 insurers writing more than $118 billion in premiums each year - lobbies before both federal and state governmental bodies on behalf of its members.

Ms Roachman said the group had also partnered with coalitions, other industry groups and grassroots movements to raise awareness of the urgent need to fix the current asbestos litigation system. In addition, the AIA mounted its own radio and TV campaign within the Washington D.C. area.

On the insurance side, a number of top property & casualty insurers have joined the AIA in a push for "meaningful" asbestos litigation reform including the US arm of ACE - ACE INA Group as well as AIG, Chubb, Hartford, Liberty Mutual, Nationwide, St. Paul Companies and Travelers.

In a letter sent by these insurers and the AIA to Senate Majority Leader William Frist (Tennessee) on July 11, 2003, they said they were working with legislators "in good faith to achieve meaningful asbestos litigation reform this year".

Ms Roachman said yesterday she remained confident that legislation could be enacted before the US Congress recessed in late October or November. Although not happy with FAIR, Ms Roachman said she was convinced that legislators saw asbestos reform as an urgent matter needing address in this session of the house.

The insurers also have the support of some key US senators with four Republicans on the Senate Judiciary Committee calling for major changes - in line with the wishes of insurers - before the bill is finally passed.

As it stands now, FAIR sets out medical standards for eligibility on compensation awards and how much should be contributed into a fund by affected parties.

It does not however rule out some asbestos claims being heard within the tort system.

These factors drew fire from insurers in their letter to Sen. Frist: "The overarching goal of S.1125 was to provide fairness and finality for all parties by creating an exclusive remedy for asbestos claims.

"Yet the committee failed to close off asbestos claims made outside the trust. Indeed, it provides for a return to the tort system - directly contrary to the finality needed by the business community," it read.

The insurers also criticised that an unfair burden was put on them: "Equally unacceptable to us is the fact that S.1125 increases the cost of this programme for insurers to an unsustainable $52 billion in core fund - a figure that could (and inevitably would) be supplemented by an additional $22.5 billion during the life of the programme..."

It added that the result was "inequitable" with insurers bearing half the cost of contingent funding when industrial defendants have far greater exposure.

Ms Roachman concluded that although the matter could be resolved this year, bi-partisan support - calling it a "political opportunity" for both parties - would be needed in both the House and Senate to get a bill passed into law.

The next step in the legislative process is for the matter to move to a debate and vote in the full senate. In addition, the US House of Representatives would also have to ratify similar legislation in the coming months followed by joint legislation being signed off by the president.