Asbestos claims have caused the insurance industry a headache for many years. But just when the issue seemed under control, American International Group has increased its reserves for this liability.
During the industrial revolution, engineers thought that they had happened upon a substance that provided the perfect solution to many construction problems. The material was lightweight, easy to use, inexpensive and extremely fire retardant. They must have thought that it was too good to be true; unfortunately, it was.
The substance was asbestos. Now banned in many countries, the material has contributed to millions of deaths, killing an estimated 10,000 people every year in the US alone, according to the Environmental Working Group Action Fund.
Ever since the first law suits surrounding asbestos poisoning in the early 20th century, many individuals have won compensation for the illnesses it causes. As such, it has been a major problem for the casualty insurance sector for some time now. Unfortunately, the industry has not always priced or reserved for this risk appropriately.
AIG, Asbestos, Stifel Nicolaus, Claims