Insurance group Royal & SunAlliance warned that profits would be hit by its decision to more than double its provision against asbestos claims.

The Horsham-based group said it was setting aside an additional £371 million for these claims, which would lead to a charge of £239 million in its results for 2001.

It was also increasing provision for its discontinued insurance operations by £145 million, in a bid to draw a line under losses.

R&SA warned that these provisions, combined with World Trade Centre losses of £215 million, would also hit its 2001 results.

Given the charges, R&SA said its full-year figures, due out later this month, would show it broke even in 2001.

This compares with operating profits of £476 million in 2000.

R&SA traditionally reviews its "long-tail liabilities" every three years but decided to bring this forward a year after increases in analysts' estimates of the cost of asbestos claims to the industry during the next 40 years.

It added that as a result of the continuing bankruptcies of firms which manufactured asbestos products, plaintiffs were increasingly taking action against companies which transported it - some of which were insured by R&SA.

Although the insurer has so far paid out only relatively small claims, about £36 million in 2001, it said there had been a marked increase in the number of potential claims it was receiving.

It has also received claims from people in the US who were allegedly exposed to asbestos between 1940 and 1980 but were not yet showing signs of disease.

About £200 million of the increased provisions relates to policies written by R&SA's UK subsidiaries, with £171 million for policies written by its US ones.

But group chief executive Bob Mendelsohn said said: "The reserving actions are tough but should reduce a significant element of uncertainty in our future results."