Although nine insurer groups experienced asbestos and environmental (A&E) losses of at least $100 million during 2009, up from six groups in 2008, the increase is still “manageable,” notes
In a special report, “U.S. Asbestos & Environmental Liabilities,” the rating agency notes that losses jumped approximately 50% in 2009 after a 47% decline in 2008. Aggregate industry funding for A&E liabilities increased by more than $4 billion over the past two years.
“While some insurer groups remain underfunded for A&E reserves to varying degrees, the potential impact to their overall level of capitalization appears to be modest,” notes the report.
The property/casualty industry is estimated to experience approximately $75 billion in asbestos-related losses and $42 billion in environmental losses, says A.M. Best.
Best’s comprehensive report includes a market review analysis and charts the industry’s net reserves and incurred losses from 2005 through 2009, as well as normalized net paid losses from 1999 through 2009. It also includes a breakdown by company of the top 15 insurer groups impacted by these losses.
Several factors affect the agency’s analysis, including the fact that although individual insurer groups will continue to post losses for asbestos, environmental or both types of claims, the related drag on earnings is expected to be mild. Tort reform by state is seen as weakening in some areas, as well as the ongoing filing of mesothelioma claims in years to come. Pollution losses, which tend to generate large loss payouts every year, also appear to be in slow decline, says A.M.Best.
“As the vast majority of the industry’s ‘mega’ losses are settled with, in most cases, waivers signed to prevent reopening of claims for cleaned sites and/or for newly discovered sites, it appears the industry has funded most of its pollution liabilities,” notes the report.
