Proposed Asbestos Trust Fund Legislation Would Save At Least $71 Billion; Boost US Competitiveness
26 April 2005
New York, 26 April 2005 -- A new study by NERA Economic Consulting estimates that asbestos litigation has cost the US economy $343 billion to date and that proposed trust fund legislation would save $71 billion in future administrative and legal costs alone. The US Senate is currently considering a bill that would remove claims from the court system and establish a $140 billion asbestos trust fund, financed by defendants and insurers.
"The costs to the US economy have been nearly 10 times as great as the compensation paid to claimants historically," report the authors of "Costs of Asbestos Litigation". The authors also found that:
- The productivity of the US manufacturing sector would be improved by eliminating the uncertainty and inefficiency of asbestos litigation. Industries heavily affected by asbestos litigation represent 13 percent of GDP and included about half the manufacturing sector in 2000. Their productivity losses due to asbestos litigation have cost the US economy $303 billion.
- The administrative and legal cost savings represent 'deadweight losses' -- monies siphoned away from both defendants and plaintiffs. Of total past payments, the authors concluded that less than half has gone to claimants.
- A trust fund could save an additional $13.7 billion in bankruptcy costs, for a total cost savings of $85 billion.
- The reduction in costs will also benefit claimants. With up to $140 billion in funding available for compensation, NERA estimates that claimants would receive as much as $65 billion more than if the status quo continued.
- Asbestos legislation will improve cash flows, reduce uncertainty and lower the cost of capital. As a lower bound estimate, the stock market valuation of reform to defendant companies is between $60 and $137 billion.
The authors conclude that asbestos legislation will benefit claimants, companies (as seen by the stock market response), workers (because of avoided job losses), and consumers, who are likely to gain from lower prices caused by improvements in productivity.
The NERA Economic Consulting study was commissioned by the National Association of Manufacturers' Asbestos Alliance. The study co-authors are Denise Martin, Faten Sabry, Paul Hinton, Ron Miller, and Stephanie Plancich.
Please direct inquiries about the study to:
Denise Martin
Senior Vice President
+ 1 212 345 5296
About NERA
NERA Economic Consulting is an international firm of economists who understand how markets work. We provide economic analysis and advice to corporations, governments, law firms, regulatory agencies, trade associations, and international agencies. Our global team of more than 500 professionals operates in 18 offices across North and South America, Europe, Asia, and Australia.
NERA provides practical economic advice related to highly complex business and legal issues arising from competition, regulation, public policy, strategy, finance, and litigation. Our more than 40 years of experience creating strategies, studies, reports, expert testimony, and policy recommendations reflects our specialization in industrial and financial economics. Because of our commitment to deliver unbiased findings, we are widely recognized for our independence. Our clients come to us expecting integrity; they understand this sometimes calls for their willingness to listen to unexpected or even unwelcome news.
NERA Economic Consulting (www.nera.com), founded in 1961 as National Economic Research Associates, is a subsidiary of Mercer Inc., a Marsh & McLennan company.
