The 2004 GIRO ConferenceUK Asbestos Working Party

12-15 October 2004, Hotel Europe, Killarney

UK Asbestos Working Party

What’s the plan ? What have we done? Main observations Some information about asbestos A bit about the HSE mesothelioma model A bit about our model Recent experience / current developments Brief US update Workshop / copies of our model(s) Andrew Darnton / Senior Statistician HSE

What have we done ?

Lots !! Definitive reference source on UK asbestos Collected industry-wide UK asbestos data Surveyed practitioners about methodology Replicated HSE model Extend HSE-type model to other diseases/costs Projected UK industry-wide costs Practical spreadsheet model & benchmarks

Headline observations from the paper

Future cost to UK insurance industry is £4-10b Over half of this relates to mesothelioma Mesothelioma projections very uncertain Future numbers very dependent on the over 80’s Asbestosis numbers peaking ? Pleural plaques mushrooming Poor data capture and limited disclosure Continued worldwide use

Some information about asbestos

Types of asbestos Use of asbestos Types of disease

Types of asbestos

Chrysotile: “White asbestos” (Serpentine minerals) Amosite: “Brown asbestos” (Amphibole) Crocidolite: “Blue asbestos” (Amphibole)

Types of asbestos: white

Types of asbestos: brown

Types of asbestos: blue

Types of asbestos

Types of asbestos: fibres

Types of asbestos

Cue samples

Uses of asbestos

Insulation (pipes and boilers) Fire-proofing (fire doors) Asbestos cement (roof and wall cladding) Friction materials (brake linings) Textiles (clothes, fire blankets) Other !! (socks, phone boxes, gas masks,

cigarette filters, gaskets on space shuttle, broomstick in Wizard of Oz)

Types of asbestos / uses

Cue Video Clip 1

Types of disease

(Pleural plaques) Pleural Thickening Asbestosis Lung Cancer Mesothelioma

Types of disease

Cue Video Clip 2

A bit about the HSE modelProjected male mesothelioma deaths in Brita in

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1 970 1 975 19 80 19 85 19 90 19 95 2 0 00 2 00 5 2 01 0 2 015 20 20 20 25 20 30 20 35 20 40 20 45 20 50

Actu al Pe to 19 99 HSE 2 00 2 Pet o 1 99 5 HSE 20 03

A bit about the HSE model

Modelled Deaths by Age Group

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A bit about the HSE model

Modelled mesothelioma deaths with different parameters

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k=3

k=2

HSE central model

Min'm latency 15years

A bit about our model

Mesothelioma based on HSE model Asbestosis based on exposure / latency model Lung cancer based on HSE model / judgement Pleural plaques based on hand-waving Average costs based on survey data / judgement Average cost inflation based on survey data /

judgement and age-adjusted allowance Overall “level” based on survey data (£1.3b paid)

Recent experience

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Current developments

CAWR regulations: May 2004 T&N / RSA court case(s) T&N pension scheme / Federal-Mogul Pleural Plaques test case: 8/11/04 Continued worldwide consumption

Brief US update

Recent US claims experience Increases in insured costs Update on the “FAIR” Act Recent legislation / developments

Recent US claims experience

Number of claims continues to grow Average size of awards has increased Number of defendants grown lots (~ 8,400) Number of companies filing for bankruptcy has

also grown (now in excess of 70)

Recent US claims experienceManville Trust - Injury by Year Filed

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Recent US claims experience

730,000+ claimants filed to date Estimate ultimate number 1-3m Manville Trust 100,000+ claims filed in 2003 Most of increase from unimpaired lives Increase in ultimate or just an acceleration? Claim filings in 2004 show sharp decline

Increases in insured costs

Coverage block expansion Reclassification of products claims as non-

products claims US carriers increased Gross reserves by $12b+

since the start of 2003 (Net $8b+) Follows significant increases in 2001 and 2002 Equitas increased its reserves by £0.3b for the

year ending 31 March 2004

Update on the “FAIR” Act

No-fault “trust fund” Remove claims from tort system Privately funded, companies and insurers (US

and non-US) Defined set of medical criteria and award levels Considerable disagreement over fund size and

who contributes what Concerns if the fund runs out of money - sunset

clause means claims revert to tort system

Update on the “FAIR” Act

Not all key stakeholders supported: Labor, Unions, Democrats, Plaintiff Attorneys

Insurance community divided Cloture vote failed 22 April 2004 Negotiations have continued but significant

compromises are still needed Size of fund converging around $140b Disagreement over pending claims, funding

levels and return to tort system So continue to watch this space ….

Recent Legislation / Developments

May 2004: Ohio first state to establish medical criteria (subject to a referendum in November)

June 2004: Mississippi tort reform: limits on where can sue, cap damages, protects some

Workshop / copies of our model(s)

What’s the plan ? Discussion of the HSE model Our model and industry estimates Recent experience and our survey Court cases - and potential impacts Questions/discussion on the paper Model(s) from www.actuaries.org.uk or e-mail julianlowe@norwich-union.co.uk

Andrew Darnton : Senior Statistician/HSE

The expected burden of mesothelioma in Great Britain

from 2002 to 2050 ByBy

  

JT Hodgson, HSEJT Hodgson, HSE

DM McElvenny, HSEDM McElvenny, HSE

AJ Darnton, HSEAJ Darnton, HSE

MJ Price, HSEMJ Price, HSE

J Peto, LSHTMJ Peto, LSHTM

Previous predictions of mesothelioma deaths in GB

Published in 1995 (Peto et al) and 1997 (Hodgson Published in 1995 (Peto et al) and 1997 (Hodgson et al)et al)

Based on simple birth cohort modelBased on simple birth cohort model Suggest peak of 2700 to 3300 deaths around 2020Suggest peak of 2700 to 3300 deaths around 2020 Data conformed to this model well up to 1991, but Data conformed to this model well up to 1991, but

departed from it thereafter (visual inspection, departed from it thereafter (visual inspection, confirmed by modelling – see later)confirmed by modelling – see later)

Age-specific death rates for 5-yr birth cohorts from 1878 to 1937 - risk increasing

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1933-37

Age-specific death rates for 5-yr birth cohorts from 1938 to 1982 - risk decreasing

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1978-82

Modelling approach (1)

Adopts HEI/Peto model: an individual’s additional Adopts HEI/Peto model: an individual’s additional meso risk caused by single year’s exposure is meso risk caused by single year’s exposure is proportional to exposure in that year multiplied by proportional to exposure in that year multiplied by the 2the 2ndnd or 3 or 3rdrd power of time since the exposure power of time since the exposure lagged by 10 yearslagged by 10 years

Assumes effect of successive years are additiveAssumes effect of successive years are additive Assumes individual exposure can be adequately Assumes individual exposure can be adequately

approximated by the product of 2 factors, one approximated by the product of 2 factors, one defined by year (Ddefined by year (DTT), the other by age (W), the other by age (WAA))

Modelling approach (2)

Choose factor values, DChoose factor values, DTT and W and WAA (and k) to achieve (and k) to achieve best fit to observed mortality for males 1968-2001 aged best fit to observed mortality for males 1968-2001 aged 20-8920-89

The implied exposure (given by the factor DThe implied exposure (given by the factor DTT) reduced ) reduced rapidly after a peak in the mid-1960s, but estimates rapidly after a peak in the mid-1960s, but estimates become increasingly uncertain, and effectively become increasingly uncertain, and effectively undetermined (under this model) from the early 1980s undetermined (under this model) from the early 1980s onwardsonwards

Assumed from indirect evidence that exposure from Assumed from indirect evidence that exposure from 2000 was 4% of peak and by 2050 will be 0.75% of 2000 was 4% of peak and by 2050 will be 0.75% of peak (RIA for recent regs)peak (RIA for recent regs)

Poisson regression modelling

Two alternative models pursued Two alternative models pursued No clearance model (half-life assumed 1000 No clearance model (half-life assumed 1000

years)years) Clearance model (half-life of 15 years – from Clearance model (half-life of 15 years – from

Berry’s modelling of Wittenoom workforce)Berry’s modelling of Wittenoom workforce) Model adequacy examined via deviance Model adequacy examined via deviance

residuals and by comparing observed versus residuals and by comparing observed versus fitted deathsfitted deaths

Results of modelling

Residual Residual Deviance Deviance

(RD)(RD)

Degrees of Degrees of freedom freedom

(df)(df)

Ratio Ratio (RD/df)(RD/df)

Age-cohortAge-cohort 121.5121.5 7272 1.691.69

ClearanceClearance 227.8227.8 182182 1.251.25

Non-Non-clearanceclearance

(preferred)(preferred)235.6235.6 182182 1.291.29

Age-cohort model

Fit significantly worse than models with Fit significantly worse than models with more parametersmore parameters

However, two possible alternatives with However, two possible alternatives with similar fits, but different future implicationssimilar fits, but different future implications

Which is closest to the truth?Which is closest to the truth?

Model parameters (1)

ParameterParameter Non-clearanceNon-clearance ClearanceClearance

Power of time since Power of time since exposureexposure

2.62.6 4.14.1

Year of exposure maxYear of exposure max 19671967 19621962

Lung clearance/half-Lung clearance/half-life (y)life (y)

10001000 1515

Model parameters (2)

ParameterParameter Non-Non-clearanceclearance

ClearanceClearance

Relative exposure potential by ageRelative exposure potential by age

0-40-4

5-155-15

16-1916-19

20-2920-29

30-3930-39

40-4940-49

50-5950-59

60-6460-64

65+65+

0.000.00

0.030.03

0.210.21

1.001.00

1.241.24

1.111.11

0.000.00

0.000.00

0.000.00

0.000.00

0.070.07

1.181.18

1.001.00

1.951.95

1.021.02

0.080.08

0.000.00

0.000.00

Model parameters (3)

ParameterParameter Non-clearanceNon-clearance ParameterParameter ClearanceClearanceChange in exposure Change in exposure

index (%/y) inindex (%/y) in

19221922

19321932

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19521952

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19671967

19721972

19821982

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55

00

-14-14

-39-39

Change in exposure Change in exposure index (%/y) inindex (%/y) in

19171917

19271927

19371937

19471947

19571957

19621962

19671967

19771977

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88

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1010

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-4-4

Differences between models

One key difference (apart from clearance/non-One key difference (apart from clearance/non-clearance distinction) is that they imply clearance distinction) is that they imply different time paths for population exposure to different time paths for population exposure to asbestos. Profiles similar up to 1950.asbestos. Profiles similar up to 1950.

One way of assessing which is best is to One way of assessing which is best is to compare their implied exposure patterns with compare their implied exposure patterns with the actual patterns of asbestos imports, taking the actual patterns of asbestos imports, taking account of differences between fibre type.account of differences between fibre type.

Pattern of fibre-specific imports scaled to same maximum for comparison purposes.

year

Crocodilite

Amosite

Chrysotile

Fitted import index for non-clearance and clearance models with best approximate weighting of actual imports

year

Imports - Amosite +0.7 x Crocidilite

No-Clearance ModelDerived ExposureIndex

year

Imports - Amosite + 2.2 xCrocidilite

Clearance Model DerivedExposure Index

Model Preference

Better correspondence between implied Better correspondence between implied exposure pattern and imports data for no-exposure pattern and imports data for no-clearance model?clearance model?

Data for the year 2001 is a more significant Data for the year 2001 is a more significant outlier in the clearance model than the no-outlier in the clearance model than the no-clearance model.clearance model.

Slight (but not definitive) preference for Slight (but not definitive) preference for non-clearance model!non-clearance model!

Plots of fitted values for non-clearance model

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Results from non-clearance model Peak of around 2150 (approx 95% CI: 1950 Peak of around 2150 (approx 95% CI: 1950

to 2450) deaths per year some time around to 2450) deaths per year some time around 2013 (approx 95% CI: 2011 to 2015).2013 (approx 95% CI: 2011 to 2015).

Total estimated mesothelioma deaths to Total estimated mesothelioma deaths to 2050 – around 90,000, with 65,000 2050 – around 90,000, with 65,000 occurring from 2002 onwards.occurring from 2002 onwards.

Fitted/projected exposure index and fitted, observed and projected deaths

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Fitted exposure index (Fixed from 1979) and fitted, observed and projected deaths

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Further work

2002 data now available (no. deaths approx. 2002 data now available (no. deaths approx. equal to 2001)equal to 2001)

Sensitivity of predicted future burden to Sensitivity of predicted future burden to choice of similarly plausible models needs choice of similarly plausible models needs further explorationfurther exploration

The 2004 GIRO Conference12-15 October 2004, Hotel Europe, Killarney

Types of disease

Cue Video Clip 3