At the end of a meeting in Jerusalem with a panel of European insurers, Lawrence Eagleburger said the processing of claims would be launched at the next full meeting of the commission, on 21 July in Washington.

Obstacles largely overcome

In talks on Thursday, the insurance companies finally capitulated in the argument over liabilities.

Claims will be paid in the real value of the dollar equivalent of the local currency at the time the policy was taken out.

More than 20 companies which have opted not to take part in the commission's settlement plan are considered likely to face sanctions through the US courts.

Claimants will not now be required to provide documentary proof for the claim if the insurance company is able to find corresponding paperwork in its own files.

Claimants who do not know the value of the original policy will be paid according to a table of averages.

Details still to be ironed out

Mr Eagleburger - a former US Secretary of State - said subcommittees would begin meeting on Friday to resolve the few remaining sticking points in the settlement.

He said he was disappointed that the commission had failed to meet its May target and that he was pressing commissioners to speed up the negotiations.

The meeting had been organised by the commission - the International Commission on Holocaust Era Insurance Claims (ICHEIC) - which was set up in October 1998 to ensure the long-overdue settlement of unpaid claims for Holocaust victims.

The commission is composed of European insurance companies, US state insurance commissioners and representatives of the state of Israel and the World Jewish Congress.

World Jewish Congress: Campaigns for the return of assets belonging to victims of the Holocaust

Many European Jews bought life or property insurance in the uncertain days leading up to the Second World War but thousands of survivors and relatives of those who died have encountered indifference and even hostility from insurers who refused to honour policies after the war.

They were told that companies no longer existed or had been nationalised by the Communists or that, in order to collect on legitimate policies, they needed death certificates - one of the few pieces of paperwork the Nazi bureaucracy spared itself from manufacturing.

Full payment

The six European insurers who belong to the commission have, however, agreed to pay out the "real" value of pre-war policies purchased by Holocaust victims.

The pay-outs will take into account inflation and currency devaluations.

The amount of outstanding claims is unknown, but industry analysts say the companies may have to find up to $4bn.

The six insurers - Generali, Zurich Insurance, Allianz, Axa, Basler Leben, and Winterthur - have set up a $100m fund to cover the claims.

Jewish representatives say the number of policies involved ran into the hundreds of thousands, although only a small number of policyholders are still alive.

Memorandum of understanding

The six companies had already agreed to cooperate with the commission by signing a Memorandum of Understanding which commits them to working to resolve claims.

By signing the memorandum, the companies agreed to:

• Cooperate fully with the ICHEIC to speedily resolve all unpaid claims;
• Provide full access to all of their relevant books, files, records, and archives;
• Contribute to the establishment of a humanitarian fund; and
• Help pay for the investigation and audits by the ICHEIC.

"The arrangements needed to make the claims process a reality will take some time, but will be moved forward as fast as possible," Mr Eagleburger said in a statement after the meeting.

The companies - which had been under increasing public pressure to honour the outstanding claims - are expected to release the names of all their pre-war policyholders which will be published on the Internet, so that survivors and their relatives can check whether they may be eligible to stake a claim.

Until recently the companies had argued that the majority of policies had been underwritten by subsidiaries that had been nationalised in Eastern Europe after the war or that policyholders had ceased to pay premiums and that the policies were therefore invalidated.

US pressure decisive

Although insurance companies have maintained that the US has no jurisdiction over the non-payment issue, the fact that they or their subsidiaries are operating in the US makes them vulnerable to legal investigation of their accounts.

The stakes were raised when the state of California threatened to name and shame recalcitrant insurers and possibly shut down their operations.

California Insurance Commissioner Chuck Quackenbush said on Wednesday he was targeting four Swiss and German insurers who had not joined the ICHEIC deal, including Swiss Re, Munich Re, Gerling Konzern, and Basler Lebens.

A spokesman for Munich Re said that the company issued no direct policies itself, and only dealt with re-insurance.

Last August, one of Italy's biggest insurance companies, Assicurazioni Generali, agreed to pay �100m to relatives of thousands of Holocaust victims.

The company was one of the largest sellers of life assurance and annuity policies in Eastern Europe in the 1930s.

Generali offered the sum to settle a class action suit brought in the United States by a group of Jews whose insurance policy claims were denied after the war.

The plaintiffs said the policies had been sold in a climate of fear as a Nazi tide flooded Europe.

But after the war the insurers were able to avoid paying out by demanding death certificates which did not exist.

Other deals for victims

The deal to make insurance companies settle with Holocaust victims and their relatives is just one of several ongoing compensation claims by victims of the Nazi regime.

Last year, Swiss banks had to set up a $1.25bn compensation fund after accusations that they had profited from gold and other assets belonging to victims of the Holocaust.

Earlier this year, 12 leading German companies agreed to compensate concentration camp survivors who were forced to work for them as slave labourers during the Second World War.