A landmark US asbestos claims agreement will significantly lower payments to less severely affected victims amid mounting concern that asbestos litigation is spinning out of control.

The settlement, covering a trust vehicle handling compensation due from a bankrupt building products group, also implements tougher diagnosis criteria for asbestos claims filed against the trust.

Seen as a victory for companies worried that claims are mushrooming from people with little evidence of sickness, it is likely to become a template for other trusts set up to pay claims, according to one person familiar with the agreement. However, it is unclear whether the deal will reduce overall payments for other bankrupt companies with asbestos exposure.

The agreement more than halves payments on non-malignant claims in an attempt to get a better deal for the sickest people.

Pressure and adverse publicity over a proliferation of claims by people who are not yet sick appears to have persuaded plaintiffs' attorneys to change tactics.

The settlement was agreed by a New York court in consultation with plaintiffs' attorneys. It covers the Manville Personal Injury Trust, the first of the trusts being formed as vehicles for companies to pay huge asbestos injury claims. The trusts are set up in the bankruptcy reorganisation process.

At least nine asbestos-related bankruptcy proceedings are pending including those against Babcock & Wilcox, Federal- Mogul, Owens Corning, Pittsburgh Corning, USG and W.R. Grace. Babcock & Wilson is likely to be the next to launch a trust formed to settle claims, which prohibits future litigation.

Some experts estimate rising claims will result in total costs for companies and insurers of $200 billion-$275 billion. Non-malignant claims are estimated to represent about 90 per cent of filings. - (Financial Times Service)