Public to prop up Hardie asbestos fund after shortfalls

THE NSW government has agreed to prop up the fund that compensates asbestos victims after shortfalls in payments by James Hardie.

A James Hardie building supplies site in Sydney in 2004.

THE NSW government has backflipped and agreed to prop up the fund that compensates asbestos victims after shortfalls in payments by James Hardie.

NSW Treasurer Andrew Constance has agreed to lend the Asbestos Injuries Compensation Fund an extra $104 million after a blowout in claims for mesothelioma, the most common form of disease caused by asbestos exposure.

The fund said in September that given an expected shortfall in coming years, it would apply to the NSW Supreme Court to be allowed to pay asbestos disease claims in instalments.

This would have severely disadvantaged sufferers in the final stages of the disease and their families.

But the fund said it could avoid this if the state government waived restrictions on a loan agreement and allowed it to increase borrowings to $320m, compared with the current $214m limit, and extended the term of the loan.

In October Mr Constance told The Australian he was not inclined to lend the fund more money, suggesting James Hardie had a moral obligation to cover the shortfall.

But faced with victims suffering financially, he has changed his mind. “The NSW Liberals and Nationals government has stepped up to the plate, providing certainty for asbestos victims and their families, whether they live in NSW or any other state or territory,” he said.

Premier Mike Baird has written to Tony Abbott and other premiers suggesting the issue of asbestos compensation is not just a matter for NSW. The letter says only 45 per cent of victims come from NSW.

“While funding the compensation of asbestos victims remains the responsibility of James Hardie, the NSW government is not willing to see those suffering from asbestos-related disease forgo full and upfront compensation because of cashflow shortfall within the fund,” the letter says.

“The NSW government decision provides certainty for asbestos victims and their families, irrespective of which state or territory in which they reside.”

The Asbestos Injuries Compensation Fund was set up in 2006 by an agreement between James Hardie and the NSW government, after a previous James Hardie compensation fund was found to be underfunded.

Under an agreement with the government, James Hardie pays 35 per cent of its free cashflow to the fund each year.

James Hardie has paid just over $700 million since the fund was set up in 2005, but failed to pay anything in 2007, 2009 and 2013, when its cashflow was negative.

During this time, the fund paid out more than $800m. The number of mesothelioma claims increased from 268 claims three years ago to 370 claims last financial year.

The total liability of the fund has increased by $177m to $1.87 billion in the past year. However, the latest actuarial assessment warned that claims could be higher than estimated.

Mr Constance said the original agreement allowed for a $320m limit on borrowings by the fund, allowing it to cover payments when the money from James Hardie dried up during the global financial crisis. But this was effectively limited to $214m, the value of the insurance policy held by James Hardie.

This limit has been removed, providing little security for the NSW government should James Hardie default on its obligations.