uk asbestos working party

UK asbestos working partyRob Brooks (Chair), Pauline Barthelemy and

Alex Twose

25 September 2019

IMPORTANT

ALL FIGURES PRESENTED IN THIS

WORKSHOP ARE DRAFT

FINAL ESTIMATES WILL BE PUBLISHED IN OUR

PAPER EARLY 2020

25 September 2019

UK asbestos working party

Mesothelioma deathsActual male GB deaths

325 September 2019

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HSE/HSL (2009) Adjusted HSE Latency

Alternative Birth Cohort Birth Cohort Observed Deaths

Mesothelioma deaths (ages 20-89)Recap

25 September 2019

Mesothelioma deathsAge profile of observed and modelled GB male deaths

525 September 2019

331 330 315 253 250 232 207 202 155

292 314 286351 349 314 337 305 270

397 379 363 433 418 418 406403 446

404 407397 435 450 431 479

490 468

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175 181 174 195 210 235 232 281 273

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Mesothelioma deathsAverage age: HSE/HSL (2009) vs. experience

625 September 2019

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Mesothelioma deaths

Heat map

725 September 2019


Mesothelioma deathsHSE model

825 September 2019

• In July this year, HSE published an updated set of model parameters based on 2017

deaths data (published numbers go up to 2050 vs 2030 previously)

• An HSE paper is expected in late 2019/early 2020 once females model has been

finalised

• Key change is that HSE have adopted a cap on the increase in the exponent of time

from exposure – adopting the main modification made in the AWP 2009 model

• We have replicated the new HSE model and considered alternative scenarios

• Deaths age 20-89 still exhibit similar shape of future curve, rescaled for recent deaths

experience

• We will update our model based on this final parameterisation and publish along with a

full paper

925 September 2019

Mesothelioma deaths: HSEOverview

Mesothelioma deaths (ages 20-89)HSE published curve (July 2019)

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Rescaled HSL 2009 HSE 2019

Observed deaths

1025 September 2019

Mesothelioma deaths: HSE

Bridge from 2009 to latest model

11

Impact of change in model

structure

Exposure profile shift

25 September 2019


Bridge from 2009 to latest model – exposure profile

1225 September 2019

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HSE model fit by age band (1)

1325 September 2019

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HSE model fit by age band (2)

1425 September 2019

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Exposure adjustments

1525 September 2019

• Individual practitioners will have the best view of exposure relevant to the

modelled claims

• We have considered example adjustments to the tail of the exposure curve in

the context of the goodness of fit to market claims experience

• Practitioners should determine a suitable end date for the projection based on

the exposures modelled

– Example adjustments shown here are based on a reduction to near zero non-background

deaths in 2060 (HSE 2019 model: 2050 GB deaths = 327)

• We expect to extend the curve in the updated AWP model to

emphasise this point


Exposure sensitivity (1)

• AWP 1 – recreate post 1978 exposure adjustment from 2009 paper. Less

steep exposure decay than updated HSE profile

• AWP 2 and 3 aim to adjust onto deaths driven by insurance exposure. Both

have around 0 exposure by 2018 and 2060 deaths approaching background

deaths only figure

– For reference, background deaths in 2060 = 35

• AWP 2 – 20% exposure decay per year post 1979

2060 modelled deaths including background = 39

• AWP 3 – 30% exposure decay per year post 1989

2060 modelled deaths including background = 40

1625 September 2019



1725 September 2019

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HSE July 2019 (20 - 89) AWP 1 (2019) - adjust post 1978 exposure per 2009 paper

AWP 2 (2019) - 20% decay post 1979 AWP 3 (2019) - 30% decay post 1989



1825 September 2019

Comparison of male aged 20 - 89 death projections (includes background) AWP1 (2009)

HSE July 2019 (20 - 89)

AWP 1 (2019) -adjust post 1978

exposure per 2009 paper

AWP 2 (2019) -20% decay post

1979

AWP 3 (2019) -30% decay post

1989

1968 - 2060 deaths 82,529 86,570 88,481 79,317 81,500

2020 - 2050 deaths 28,181 28,666 29,882 23,240 25,262

2020 - 2060 deaths 28,181 30,899 32,786 23,739 25,859

(2020 - 2050) / 2019 multiplier 15.1 14.8 15.3 12.3 13.1

(2020 - 2060) / 2019 multiplier 15.1 15.9 16.8 12.6 13.4

% change in 2019+ multiplier from AWP1 (2009):

2020 - 2050 -2% 1% -19% -13%

2020 - 2060 5% 11% -17% -11%

Average squared difference projected versus observed deaths (age 20 - 89 and 1968 - 2017 period)

3,774 1,172 1,148 1,411 1,223

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AWP 1 (2019) - adjust post 1978 exposure per 2009 paper AWP 2 (2019) - 20% decay post 1979

AWP 3 (2019) - 30% decay post 1989 Background

1,650

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Age 90+ sensitivity (1)• Extension of the model to project deaths age 90+ is a key area

of uncertainty

• We have discussed with the HSE and compared a number of

approaches*:

a. Linear extrapolation of deaths ratio age 90+ to deaths age 20-89

(HSE approach) Y = mX + C. HSE uplift on numbers of deaths

increases from 5% in 2018 linearly to 15% in 2050.

b. Exponential fit of the form Y = Exp [ -1 / ( mX + C ) ]

c. Exponential fit of the form Y = C.Exp (bX)

d. Extension of HSE model to fit deaths up to age 94 (based on May

2019 draft parameter set)*All AWP curves have been fit on 2013 – 2017 data points, Y = uplift

• We present a range of sensitivities and consider the impact on

the multiplier of future deaths over 2019 calendar year deaths

• Propensity to claim at these older ages is another key issue

for the market estimate

1925 September 2019

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Observed deaths (Ages 20-89)

Observed deaths (Ages 20-95)


Age 90+ sensitivity (2)

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Actual AWP - Linear fit

AWP - Exponential decay offset HSE fit

AWP - Exponential fit HSE - May 2019 model 20-94

Uplift to all ages including 90+

HSE July 2019 20 - 89

forecast HSE uplift AWP - Linear fit

AWP - Exponential decay

offset AWP - Exponential fit

HSE - May 2019 model 20-

94

2020 - 2050 deaths 28,666 31,198 31,079 31,296 32,884 32,721

2020 - 2060 deaths 30,899 33,767 33,665 33,947 36,879 35,463

(2020 - 2050) / 2019

multiplier 14.8 15.3 15.2 15.3 16.1 16.1

(2020 - 2060) / 2019

multiplier 15.9 16.5 16.5 16.6 18.0 17.4

HSE uplift(2020 - 2050) / 2019

multiplier0% 3% 3% 4% 9% 9%

(2020 - 2060) / 2019

multiplier0% 4% 4% 4% 13% 9%

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20-94 AWP linear uplift 20-94 AWP exponential decay offset 20-94 AWP exponential fit

Observed deaths 20-89 Observed deaths 20-95

25 September 2019


Population sensitivity

• HSE projection is based on ONS 2016 population projection and mid-2016

actuals (actuals used up to 2016 year)

• 2009 model was based on ONS 2006 projection and 2006 actuals

• AWP 2019 projection uses consistent assumptions with HSE 2019

• As sensitivities, we have also reviewed the impact of using actual figures up

to 2018 (negligible impact) and the ONS projection with zero net migration

(circa 1% reduction in deaths from 2020)

• ONS will release updated population projection on 21 October 2019 – to be

consider in final published model

2125 September 2019


Mesothelioma deathsAge-Birth GLM model

2225 September 2019

Mesothelioma deaths: Age-Birth GLMOverview

• Updated parameters for 2017 deaths

• Limited impact of re-parameterisation

• Alternative scenarios based parameters based on uncertainty at older ages

(85+) and birth cohorts (1960 and onwards)

– Scenario 1: Deaths at ages 85+ and birth cohorts post 1950 will be lower than currently

reported

– Scenario 3: Deaths at ages 85+ and birth cohorts post 1950 will be higher than currently

reported

• A potential range of outcomes but by no means provide an upper or lower

bound

– Practitioners may wish to consider or use the alternative parameterisations

2325 September 2019

Mesothelioma deaths: Age-Birth GLMParameters

Age parameters

(6)

(5)

(4)

(3)

(2)

(1)

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Pure data GLM scenario 1

GLM scenario 2 GLM scenario 3

Birth parameters

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GLM scenario 2 GLM scenario 3

25 September 2019

Mesothelioma deaths: Age-Birth GLMScenarios

25

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25 September 2019

Mesothelioma deathsComparisons

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Scenario 23 (AWP 2009) Observed deaths

25 September 2019


Mesothelioma average cost

2725 September 2019

Mesothelioma average costOverview

Model based on 2008 detailed data

Key changes:

• General Damages (new guidelines and

reduced court inflation)

• Ogden multipliers and discount rate

• Proportion living at settlement from market

survey

• Settlement pattern

Using Ogden discount rate at -0.25%, but

showing scenarios at 2.5% and 0.5%

Model allows for a different Ogden discount

rates

Three cost scenarios by considering the

future inflation by each type

28

Inflation type Scenario A Scenario B Scenario C

RPI 1.5% 2.5% 3.5%

Wage 2.5% 4.0% 5.5%

Court 1.5% 3.5% 5.5%

Ogden uplift % 2.0% 4.0% 6.0%

Ogden uplift every 6 years 5 years 4 years

Implied p.a. inflation 2.2% 4.1% 6.0%

25 September 2019

Mesothelioma average costImpact on 2009 Scenario 23 (years 2019 to 2050)

29

£7.6bn

£8.1bn

£7.5bn

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£7.6bn

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£8.2bn

Scenario 23(2009)

Individualages

CRUcorrection

7th Ogden(SY2011 &onwards)

Actual RPI &Court

inflation

Livingproportion to

63%(SY2017 &onwards)

Settlementpattern

Court = RPI+1%

(SY2018 &onwards)

4% increasein Ogden(every 5

years fromSY2020)

Ogdendiscount rate

changes

AdjustedScenario 23

(2009)

Insura

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ost of

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25 September 2019

Mesothelioma average costFurther developments

Considering changes based on:

• qualitative views from claims handers; and

• quantitative analysis from CRU and survey data

– Increasing the payment pattern (also evidence by survey data)

– Changes to heads of damage by age

– Claims to claimant ratio consistency with propensity to make a claim

• Next steps comparing implied claims to claimant ratio and survey

average costs

3025 September 2019


Mesothelioma claims to deathsPropensity to make a claim and claims per claimant

3125 September 2019

Mesothelioma claims to deathsCRU data – Background• The Compensation Recovery Unit (CRU) is informed of all asbestos-related claims giving rise to compensation, whether from the

insurance industry or the Government, and an insurer must notify CRU of a claim within 14 days, so should be minimal delay in

notification dates compared to insurance notification date

• The last full set of data received from the CRU (under a Freedom of Information (FOI) request) was for notification years 2007 to

2015, received in February 2016

• The FOI for 2016 and 2017 data have since been rejected based on the cost to produce the data, however, we managed

to get aggregated data for 2016 (partial), 2017 and 2018 after multiple data requests and attempt to contact the CRU. We

continue to send data requests.

• Anonymised Customer Number provided to enable us to “group multiple claims for each customer”, i.e. to produce a “claimant”

list rather than “claim” list. Where a claimant has more than one data field classification, we have used the following “priority”

order to map:

– IP’s Sex: Male, Female

– Liability Type: Employer, Public, Other, Clinical Negligence

– Type: Non-State, Local Authority, National Industry, NHS, Government Department

– Country: England, Scotland, Wales, Northern Ireland, Channel Islands, Isle of Man

– Claim Status: Live, Settled, Withdrawn

• Reduces 22,319 claims to 15,023 claimants, which the claim experts agree should represent all claimants

who bring a claim (although the claim data will be inconsistent)

3225 September 2019

Mesothelioma claims to deathsCRU data by notification year & HSE deaths

33

• Male Employer (ex Gov) claims

consistently around 1,330 to

1,420 for 2007-2015

• Female Employer (ex Gov)

claims consistently around 90

to 110 for 2007-2015

• Increase in Government claims

for 2014-2018 due to DMPS,

increase broadly consistent

with claim numbers announced

by DMPS

• HSE Deaths have been

decreasing (latest HSE 2017)

for male, but up for female –

The number is slightly down for

2017 but flat overall

No CRU split available for 2016, 2017 and 2018

2016 is pro-rated as data was only provided for April-December

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2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

CRU Claimants & HSE deaths - Male & Female combined

"Non-State" Employer Loc Auth, Nat Ind Employer Gov Employer (inc NHS)

Public Other (inc Cln Neg) No. HSE deaths

DMPS applications CRU Claimants less DMPS

25 September 2019

Mesothelioma claims to deathsConflicting trends in deaths, claimants and claims

• Deaths have been decreasing

(latest HSE 2017) for male, but

up for female – The number is

slightly down for 2017 but flat

overall

• BUT notified claims have been

flat then reducing for 2015 to

2017 – then up for 2018

• Previous CRU data suggests

non-government employer

claimants has been flat

• Note that the claims are from

the data collection, so roughly

80% of the market

34

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Deaths, Claimants and Claims - Male & Female Combined

Claims - Notified (2018 data collection) Claimants (CRU Emp ex Gov - Proj Non-Nil)

Claimants (CRU Emp ex Gov) Claimant (CRU All)

Deaths (HSE)

25 September 2019

Mesothelioma claims to deathsProportion live at notification

• Proportion of Live claimants from the data collection has

increased over time but looked to be stabilising until 2017

– Slightly up in 2018

• Additional background from claims experts

– Historically Scottish claims waited until after death to get higher claim for

multiple dependants, but legislation in 2012 and 2014 changed this

– Diagnosis is earlier, and also people living longer

– Anecdotally, it was felt that the length of time between diagnosis and

notification has shortened over the last five years but has plateaued

around 4-6 months for the last two years

– Potential of data being provided to help us investigate trends in length of

time between notification and death

– One view was that while the live proportion appears to have levelled off,

immunotherapy will give it another boost with people

claiming earlier to secure treatment rather than purely

to support dependents

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2018 NY Data 2017 NY Data

2016 NY Data 2015 NY Data

25 September 2019

Mesothelioma claims to deathsMoving parts between deaths and claims

36

• Changing claim to claimant:– Claim manager view is that the number of cases with

multiple defendants is reducing in line with the UK exposure

profile, e.g. classic multiple defendant case is a lagger

– Could the number of insurance claims be reducing due to

market consolidation

– Ratio comparing non-nil claims compared

to CRU Employer (ex Government)

claimants pretty stable since 2011

• Notification earlier, more likely when still alive due to:– Diagnosis earlier

– Scotland legislation

– Immunotherapy (and other private medical treatments)

• Potential longer survival– Claimants living longer due to medical advances, not just due

to earlier diagnosis

• Lower propensity to claim from older ages– Propensity stable or slightly increasing for a particular age,

but aging population will reduce the aggregate propensity

5%

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2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Propensity to Claim (Employer ex Government ex Withdrawn)

Combined Male Female

Estimation only

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2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Implied Claim to Claimant Ratio

Non-Nil / Emp ex Gov (non-nil) Notified / CRU All

Notified / CRU (non-nil) Notified / Emp ex Gov (non-nil)

25 September 2019

Mesothelioma claims to deathsMoving parts underlying the trends

• Implications of these underlying changes:

– Where we previously assumed claim notifications were spread fairly evenly before and after date of death, there seems to be evidence

that the notification date is now (on average) earlier than deaths

– Will impact the propensity to claim assumed over recent years and projected going forward.

– Will also impact the claim to claimant assumption

• How do we plan to model propensity to claim going forward:

– Estimate the future live vs deceased proportion

– Estimate the delay between notification and death or death and notification as appropriate

– Combine to produce a matrix mapping notification year to death year (and visa-versa)

– Use this along with (updated) CRU claimant data (if we ever get it!) and HSE death data to get a better understanding of propensity to

claim when looking at consistent groups of people.

• How do we plan to model claim to claimant going forward:

– Combine the market survey data with the CRU claimant data (for Employer, Non-Government claimants only) to see what trends are

emerging

– Combine with qualitative data from the market to project going forward.

3725 September 2019


Non-mesothelioma insurance cost

3825 September 2019

Non mesothelioma claimsOverview

• Not detailed models for claim numbers or costs

• Numbers judgemental, given epidemiological and non-epidemiological impacts

– 3 scenarios based on scaling Age-Birth GLM mesothelioma patterns:

– 1 scenario based on AWP 2009* number 2 curves

• Costs based on settled (reported and settlement year basis) and incurred,

recent year averages

• Projections include nils – historical trends on nil rates have been reasonably

stable

• Included pleural plaques for Scottish and Northern Irish exposures

39* AWP 2004 for pleural plaques with Scottish and Northern Irish exposures25 September 2019


Legal and Other

4025 September 2019

Legal and Other

Equitas vs MMI

How should insurers allocate mesothelioma claims to reinsurance

contracts

• Court found that "spiking“ of mesothelioma claims settled under

employers' liability insurance policies should not extend to a reinsurance

context

• Insurers not entitled to present their reinsurance claims to any policy year

of their choice and must present the claims on a pro rate time of risk basis

• Court of Appeal granted MMI permission to appeal. Anticipated that the

case will be heard by the Supreme Court in the first half of

next year

25 September 2019 41

Legal and Other

Ogden and Immunotherapy

Ogden

• Lord Chancellor announced 15 July 2019 a change in the Ogden Discount rate which has moved

from -0.75% to -0.25%. This new rate effective in England and Wales as of 5 August 2019.

• This is in line with the discount rate used in Scotland of -0.25%, under the Damages (Investments

Returns and Periodical Payments) (Scotland) Act 2019.

• Left open the possibility of dual rates

• Statute requires that the discount rate be reviewed within 5 years

Immunotherapy

• For mesothelioma claims reported in 2018, 5% have requested immunotherapy treatment for the

sufferer

• Low settled proportion, 0.4% on average of those have settled with an agreed

settlement on immunotherapy treatment


Summary and next steps

Summary

• Not a significant change, but an increase

in the insurance market estimates

• Uncertainty around when mesothelioma

claims peak and how they run-off

– HSE have adopted AWP capping of k

• Extending to 2060, but practitioners

should consider their own exposure

• Looking at impact of 90+ ages given

limited data at these ages

Next Steps

• Assess the model and adjust

parameters

• Finalise mesothelioma and non-

mesothelioma scenarios

• Models and spreadsheets on

website

• Paper outline results and key

sections from previous

papers



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of any nature and should not be treated as a substitute for specific advice concerning individual situations. On no account may any part of this presentation be

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