Four big competitors dispute the sale of ACE Ltd obligations.

The companies are asking Pennsylvanian and British regulators to prevent the property-casualty insurer from any transactions leading to discharge of some of its asbestos obligations.

It is a new page in a long-running legal battle between Maurice "Hank" Greenberg, chairman of American International Group Inc. and Evan Greenberg, chief executive of ACE.

An attorney representing AIG, Allstate Corp., Chubb Corp. and St. Paul Travelers Cos. Composed sent a letter asking Pennsylvania Insurance Commissioner Diane Koken to stop ACE’s planned sale of three subsidiaries to U.K. private-equity investors.

ACE is about to sell three of its insurance units dealing with substantial liabilities for policies covering asbestos and environmental claims. ACE acquired a number of such liabilities when it bought Cigna Corp.’s property-casualty insurance business in 1999. Cigna had created a separate operating company covering those polices so that its remaining operations could do business with a clean bill of health from regulators and rating agencies.

In a letter drafted by attorney Mark A. Aronchick, of Hangley Aronchick Segal & Pudlin in Philadelphia the four insurers charge ACE with shedding its legal obligations to policyholders. An ACE spokesman refused to comment.

ACE, following Cigna’s example, has asserted it could walk away from any further claims on the old policies once it would not possess the necessary resources to cover them. Those recourses comprise $4 billion in assets and additional $850 million set aside by Cigna, plus a $2.5 billion reinsurance policy ACE bought at the time of its purchase. At the moment ACE has spent most of those funds.

Several insurers, including AIG, contested Cigna’s original move, arguing it didn’t protect Cigna, and later, ACE, from the obligation to pay claims if those resources proved too little.

As ACE wound up the review of its asbestos liabilities late last year, several analysts predicted that the company’s entire assets and reinsurance were used to cover the old policies. Insurance insiders were curious about the company’s next step, eager to see whether it would proceed paying claims or walk away from claims on the old policies.

Instead, ACE astonished everyone by announcing on January 6 that it gave consent on selling the units holding old policies to Randall & Quilter Investment Holdings Ltd., a U.K. investment firm, and hoped to finish the deal in the first half of this year.

The insurers argued that the company is trying to avoid paying claims by transferring ownership to the U.K.
The letter -- accompanied by some 500 pages of supporting material -- isn’t the first time competitors have confronted ACE on asbestos-related claims.

In the past, the strongest opposition has come from AIG, which also has contested with ACE in a California court. AIG has won the lawsuit accusing Cigna of violating state law while transferring its policies to a new legal entity without its clients’ permission.

A spokeswoman for the Pennsylvania Insurance Department said the public comment period for the ACE transaction is scheduled to run from Saturday through April 5. She declined to comment on the insurers’ letter.