A "landmark" decision by a US court on January 19 gives insurers more negotiating power in asbestos liability cases, Evan Greenberg, chief executive of ACE Limited, said this week.

Mr. Greenberg, on a conference call with investment analysts after Ace's Tuesday release of 2005 results, said asbestos trust fund legislation also stands a chance of getting approved by the US Congress in 2006.

"We are actively supporting the legislative process and believe that satisfactory trust fund legislation can emerge from it," Mr. Greenberg said. Ace will extend its support if certain changes are made to the measure being championed by Senator Bill Frist.

The legislation is something Ace and other insurers have been prodding the US government to install. The sector has been hit by billion dollar claims from Americans lining up before the court with complaints of exposure to asbestos, a cancer-causing fire retardant that was once used to insulate buildings. Asbestos awards and settlements have escalated since the late 1990s.

And Mr. Greenberg said the reversal of a 1998 decision in the Fuller-Austin Insulation Co. bankruptcy will "alter the landscape" in asbestos proceedings. The California Court of Appeal last month ruled the 1998 decision to establish a trust to handle a wave of asbestos liability claims that were behind Fuller-Austin's collapse should not stand.

This legal development, and what happens on Capitol Hill, has the potential to spell financial benefits for Ace. In recent years the company has on numerous occasions increased its funds set aside to pay asbestos claims. Ace could stand to reclaim some of those reserved funds if the size of monetary awards are scaled back, and if a legislative trust is established.

Ace, like some other insurers, has had to set aside greater funds to pay asbestos claims. Two years ago the company took a charge of $354 million. And then a year ago it recorded a new charge of $302 million to boost its reserve fund for asbestos claims. The charges represent the net cost to Ace. On a gross basis Ace has increased its reserves by the billions of dollars with some of the cost shouldered by the company's reinsurers, including Berkshire Hathaway's National Indemnity Co.

Ace was saddled with its asbestos liabilities after buying Cigna's P&C business in 1999. Some reinsurance coverage for asbestos liabilities was negotiated as part of the sale. The company is currently trying to iron out the sale of some of the units that hold those liabilities. Those units are in run-off, or closed to new business, while still honouring claims on policies already sold.

Mr. Greenberg would not be drawn on what legal developments, like the Fuller-Austin reversal, could mean for Ace in "number terms". General counsel Robert Cusumano said the decision was "critically important to us because it changes the whole atmosphere in bankruptcy settings and maybe beyond that".

Under the California Court's reversal, he said insurers have "a more or less absolute right to participate (in negotiations)" and that policyholders "owe insurers a reciprocal duty of good faith in that negotiation. If you look at it as a balance of negotiating power it is a landmark decision".

Mr. Greenberg said: "This decision recognises the right of insurers to deny coverage of unfair or collusive settlements: Insures pay claims only when and if they come due. We believe this is a major defeat of the trial bar."

Up to 90 percent of asbestos claimants have no signs of serious illness, according to the New York Insurance Information Institute, an industry organisation that compiles data for the sector. Asbestos liabilities have been a factor in the bankruptcy of more than 70 companies since 1976, it said.

Separately, a UK court ruling last month may save insurers in that market more than 1 billion pounds. The Court of Appeal ruled that people suffering from pleural plaques, a thickening of the lining of the lungs caused by being exposed asbestos, are not eligible for compensation, Reuters reported on January 26.

The decision overturned a previous court ruling that companies should pay money to employees who had developed the condition as a result of being exposed to asbestos at their workplace.