The US Senate has reached an agreement with the American Insurance Association (AIA) to put up $161.7 billion to fund asbestos claims for the next 27 years. The AIA says its member companies have “overwhelmingly” approved the funding plan, which has yet to be agreed by unions or plaintiff lawyers’ organisations.

Senate Majority Leader Bill Frist said in a statement that while many details have to be worked out yet, “clearly this is a significant and meaningful step forward between the two major parties to the larger asbestos negotiations”.

The asbestos plan had been expected to fail at the hands of the plaintiff lawyers, who wanted more. The insurers have agreed to kick in $65 billion over the next 27 years, with defendant companies contributing another $80.8 billion over 23 years. Bankruptcy trusted – set up by companies litigated to death – will contribute $2.1 billion, and investment earnings are expected to bring the total to $161.7 billion.

But wait, there’s more: the lawyers also want a $14.1 billion contingency fund just in case they manage to exhaust the new fund.

It’s expected that more than 30% of the settlement will be made by foreign insurers, despite the fact that most believe the settlement is unjustified and the asbestos claims are driven more by greed than need. Now actuaries Tillinghast-Towers Perrin say the fact that US insurers have increased their asbestos claims reserves by as much as $14 billion since January may impact on the London market.

Reactions magazine quoted Tillinghast consultant Darren Michaels saying the multi-billion dollar increases in asbestos-related loss reserves “will have a knock-on effect in the global market, especially London”.

He said claims from the major asbestos defendants that reach higher levels of cover are beginning to flow through to the London market. “London market insurers should carefully monitor the situation,” he said. “These are uncertain times regarding asbestos.”