Asbestos is now linked to lung cancer

The fund is aimed at staving off the rush of asbestos lawsuits, with the fund ending the victims' right to go to court to sue for compensation.

The plan was brokered by the office of Senate Republican Leader Bill Frist, after insurers and companies squabbled over who should pay what into the fund.

Even though the industry has now managed to agree on the size of the fund, it could still face fierce opposition from trial lawyers and labour unions who have lobbied against the fund saying it is too small.

"Clearly this is a significant and meaningful step forward between two major parties to the larger asbestos negotiations," said Senator Bill Frist.

But comments from a labor federation spokesmen immediately suggested that they were not happy with the size of the fund.

"We'll keep an open mind, but it's extremely unlikely that anything will be worked out," said Jonathan Hiatt, from the AFL-CIO labor federation.

Bankruptcy fears

Thousands of lawsuits filed by victims of asbestos have already driven 67 US companies into bankruptcy.

There are an estimated 300,000 to 400,000 victims still seeking compensation.

Asbestos was widely used for fireproofing and insulation until the 1970s when it was linked to cancer and other diseases.

The insurers have agreed to pay $46bn into the fund, with the defendant firms making up the rest.

But the American Insurance Association has stressed that it will only pay its share on the condition that lawmakers ditch an amendment that would allow victims to return to court if the fund money runs out.