US property/casualty insurers can expect losses from third-party liability asbestos claims to increase 18 percent to $100 billion, according to an AM Best report.
AM Best said that the $15 billion increase to the net ultimate asbestos loss estimate comes as insurers are incurring approximately $2.1 billion in new losses each year while paying out nearly $2.5 billion on existing claims. As a result, the ultimate industry losses for asbestos and environmental (A&E) is now $142 billion.
Industry funding of the $142 billion in net A&E exposures has reached approximately $124 billion, broken out by $98.1 billion in cumulative paid-to-date losses and $26.3 billion in reserves set aside for future payments.
The ratings agency stated that this translates into a funding rate of 88 percent of ultimate A&E exposures, or approximately $85 billion of asbestos funding (85 percent funded) and $40 billion of environmental funding (94 percent funded).
Over the last five years, the industry has paid out $16.7 billion for asbestos and environmental claims, while incurring $13.5 billion in losses.
AM Best believes the property/casualty industry’s asbestos losses will continue to be an issue given an unstable environment faced with evolving litigation, increasing secondary exposure cases and an increase in life expectancy.
“Asbestos losses continue to dominate the discussion around the industry’s A&E exposures, comprising more than 80 percent of total A&E liabilities,” said AM Best.
“However, it is extremely difficult to quantify the industry’s ultimate loss exposure, given the evolving nature of asbestos litigation, tort reform and the growing incidence of lung cancer being linked to asbestos exposure.”
AM Best, Asbestos, Property, Casualty, Environment, North America