Posted on 18 Feb 2011
According to a market review analysis on asbestos and environmental (A&E) losses released by A.M. Best Co. Inc. on Thursday, there has been a jump of about 50% in 2009 after experiencing a decline of 47% in 2008.
The cost of asbestos losses to the U.S. property/casualty insurance industry are estimated at about $75 billion and environmental losses $42 billion, according to the report by Best. Previous estimates by the ratings agency for asbestos losses for the industry ran $65 billion, with environmental losses of $56 billion.
Best reported that nine insurers incurred A&E losses of $100 million or more during 2009, which is up from six groups in 2008.
“Ultimate industry exposures for A&E now are expected to reach $117 billion,” Best said in its report. “As of year-end 2009, the industry had funded, through a combination of paid losses and loss reserves, more than $68 billion in asbestos exposures and approximately $35 billion in environmental costs.”
Best said the property/casualty industry’s aggregate funding for A&E increased by more than $4 billion during 2007 and 2008.
With regard to asbestos, the increase in estimates at the end of 2009 the Best report said reflected ongoing elevated levels of annual incurred losses, as well as “a subtle shift of losses away from products liability claims to nonproducts claims involving more peripheral defendants for higher settlement values.”
Most insurers reported small increases or small decreases in asbestos paid losses. During 2009, Travelers Cos. Inc. and Swiss Reinsurance Co. Ltd. reported sizeable decreases of $515 million and $265 million, respectively. The decreases were followed by increases by those two insurers in 2008 of $540 million and $280 million respectively.
“Essentially, 2009 saw a return to more normal levels of asbestos payments, particularly for these two companies,” Best analysts said in their report.
Last year, Travelers was ordered to pay $500 million in an asbestos-related claim.