Asbestos claims probably will cut into insurance companies' profits this year as the industry narrows an estimated $20 billion gap in reserves for the claims, according to a report by A.M. Best Co.

“A.M. Best fully expects additional, sizeable asbestos charges to be taken during the remainder of 2003,'' the company said in a 14-page report.

A.M. Best assigns credit and financial strength ratings to insurance companies.In the past 12 months, Travelers Property Casualty Corp., Hartford Financial Services Group Inc. and ACE Ltd. tripled their claims-paying reserves to more than $13 billion as the cost of settling asbestos class-action lawsuits rose.

CNA Financial Corp.and Warren Buffett's Berkshire Hathaway Inc. may be among the next to increase reserves, said Matthew Carletti, an insurance analyst at Fox-Pitt Kelton Inc. in Hartford, Connecticut.

“There are companies out there that we could perceive to have asbestos exposure and haven't addressed it yet,'' Carletti said.

“Whether it comes this year or next year, who knows.''

A.M. Best estimates that asbestos, a fibre linked to cancer and lung disease, will cost insurers $65 billion. Insurance companies already have set aside $45 billion to pay for claims, leaving a funding gap of $20 billion, according to the report, which doesn't say which companies are most under-reserved. CNA said in August it would complete a review of its asbestos reserves in the third quarter.

CNA spokesman Charles Boesel declined to comment further. Marc Hamburg, chief financial officer of Berkshire, which owns General Reinsurance Corp. and other underwriters, didn't return a voicemail. Reinsurance companies have been slower to increase reserves than the primary underwriters that they insure, such as Travelers and Hartford, Carletti said. Lloyds of London, Munich Re and other European reinsurers may need to boost reserves, he said. “These losses are big enough that it's definitely going to fall on the reinsurers' shoulders,'' he said.