1. The Next Asbestos Bonnie Boccitto, FCAS, CPCU, MAAA Chief Underwriting Officer Munich-American RiskParnters is a division of American Re-Insurance Company

2. The Next Asbestos  Why has asbestos proven to be so difficult to quantify?  On the horizon  Electromagnetic Fields  Silica  Pharmaceuticals Munich-American RiskParnters is a division of American Re-Insurance Company

3. Asbestos Characteristics of the product  Large number of people affected  Large number of defendants  Disease manifests after a long period of time  Non-reversible, fatal effect  Use of court system (tort) rather than WC Munich-American RiskParnters is a division of American Re-Insurance Company

4. Asbestos Characteristics of a Legal Environment  Evidence of concealed knowledge  Continuous exposure theory  Class action suits  Bankruptcies  “Fear of” claims Munich-American RiskParnters is a division of American Re-Insurance Company

5. Asbestos Litigation 1940’sExposure in ship building industry during WW II 1950’s – 60’sExposure at construction sites 1973Asbestos claims began 1981Judge Brazelon declares continuous exposure theory 198216,000 claims against Mansville/ Mansville declares bankruptcy Late 1980’s Class action suits begin Early 1990’sPleural plaque (unimpaired) claims Mid 1990’sDefendants offered $1.2 billion settlement agreement with no value for future pleural plaque claims 200030,000 New Claims 200290,000 New Claims 2003100,000 New Claims Munich-American RiskParnters is a division of American Re-Insurance Company

6. Asbestos: Current Status  Federal asbestos trust fund discussions delayed  Rand estimates 730,000 total claims  Estimate 200,000 claims still pending  Milliman projects that the total cost of settlements will ultimately reach $265 billion  Asbestos defendants have grown from 300 in 1980’s to 8,400 today Munich-American RiskParnters is a division of American Re-Insurance Company

7. Electromagnetic Fields (EMF’s)  U.K. group re-visiting worldwide studies to determine link between EMF’s and cancer.  Claims that exposure to electromagnetic fields cause reactions in the skin similar to the reaction to radioactive material.  Fourfold increase in tumors on the auditory nerve of those using analog cell phones over a period of 10 years Munich-American RiskParnters is a division of American Re-Insurance Company

8. Electromagnetic Fields (EMF’s)  Study by EU members found breaks in individual strands of DNA  NYC Council is considering a long-term study of cell- phone base stations  A 23-year study concluded that there is no established link between the broadcast antennas and brain and nervous systems cancers Munich-American RiskParnters is a division of American Re-Insurance Company

9. Electromagnetic Fields (EMF’s)  Affects large number of people  Potential latent effects  Utilities as defendants would be unattractive. Could other defendants be found?  Cell phone manufacturers would be attractive defendants  Seriousness of affect  Could affect WC and tort system  Class action suits definitely possible  “Fear of” claims definitely possible Munich-American RiskParnters is a division of American Re-Insurance Company

10. Silica  Silica comes from sand and gravel with a high concentration of silicon dioxide and is found in concrete powder, glass, detergents, and ceramics.  Silica causes silicosis, pulmonary fibrosis, and allergic bronchopulmonary aspergillosis  Year Silica Cases  1975 – 2001200  20023,500  200322,000 Munich-American RiskParnters is a division of American Re-Insurance Company

11. Silica Multi-Defendant Suits  Multi-Defendant Claims  California: 50 defendants  Philadelphia: 15 co-defendants  Florida: 8 defendants  Washington state: 60 potential defendants  Alabama court dismissed a complaint against 75 defendants for lack of specifics tying the defendants together. Munich-American RiskParnters is a division of American Re-Insurance Company

12. Silica Class Action  Estimates suggest 480,000 former miners with silicosis in South Africa.  Miners in Ontario  10,000 claimants in Federal Court in Texas in 2006.  New Jersey silica plaintiffs were unsuccessful in a recent attempt to have the silica litigation designated as a mass tort.  California “class action” dismissed Munich-American RiskParnters is a division of American Re-Insurance Company

13. Silica “Fear of” Claims  Sandblaster who was diagnosed with silicosis but was never disabled, may still receive an award of medical benefits from his former employer.  Ohio considering bills to block “fear of” claims Munich-American RiskParnters is a division of American Re-Insurance Company

14. Silica Federal Settlement  Lawyers moving to silica claims if asbestos litigation is not found satisfactory  Some talk that silica to be part of the $140 billion privately financed, privately administered asbestos trust fund Munich-American RiskParnters is a division of American Re-Insurance Company

15. Silica  Large number of people effected  Large number of defendants  Disease manifests after a long period of time  Non-reversible, fatal effect (but preventable)  Use of court system (tort) rather than WC  “Fear of” claims  Class actions  privately funded federally administered settlement  International in scope Munich-American RiskParnters is a division of American Re-Insurance Company

16. Pharmaceutical Manufacturers  Pfizer  Merck  Novartis  Lilly  Wyeth  J & J Munich-American RiskParnters is a division of American Re-Insurance Company

17. Pharmaceuticals Large Number of Claimants A U.S. Government study reported that more than 40% of Americans take at least one prescription drug and one in six take at least three. Munich-American RiskParnters is a division of American Re-Insurance Company

18. Pharmaceuticals Large number of defendants  Manufacturers  Doctors  Pharmacists  Managed care organizations Munich-American RiskParnters is a division of American Re-Insurance Company

19. Pharmaceuticals Class Action  BMS, manufacturer of the drug Serzone, agrees to settle class action involving over 2,000 plaintiffs  States enter litigation  Purdue Pharma, manufacturer of OxyContin, has settled with the Attorneys General of West Virginia and Florida on claims that the company misrepresented the additive nature of the drug, creating a public nuisance and violating state deceptive trade practices. Munich-American RiskParnters is a division of American Re-Insurance Company

20. Pharmaceuticals Latent Effects Personal Injury, Property Damage or Advertising Liability shall be determined under the Policy in effect on the date in the Annual Period when Notice of Integrated Occurrence is first given Munich-American RiskParnters is a division of American Re-Insurance Company

21. Pharmaceuticals  Large number of people affected  Large number of defendants  Disease manifests after a long period of time  Non-reversible, fatal affect  Use of court system (tort) rather than WC  “Fear of” claims  Class actions  privately funded, federally administered settlement  International in scope Munich-American RiskParnters is a division of American Re-Insurance Company

22. Thank you for your interest. This material is being provided to you for information only, and is not permitted to be further distributed without the express written permission of American Re. This material is not intended to be legal, underwriting, financial or any other type of professional advice. " © Copyright 2005 American Re-Insurance Company. All rights reserved. The American Re and Munich-American RiskPartners names and logo are registered marks owned by American Re-Insurance Company.