Asbestos to hit reinsurers
European reinsurers could bare the brunt of hikes in asbestos costs and reserves as asbestos losses soar by $10 billion for US insurers, according to a report by RuxleyResearch, part of run-off specialist Ruxley Ventures.
In its fifth research publication, RuxleyResearch has identified the significant increase (by $10 billion) in the expected ultimate cost of dealing with asbestos claims as a source of growing uncertainty for European (re)insurers. The research concluded that while the average US asbestos survival ratio of European (re)insurers remains healthy and consistent with previous years, the challenges facing US insurers could become a problem for their European counterparts, particularly reinsurers.
This uncertainty comes against a background of mounting pressure from investors and regulators for insurers to deliver ever greater capital efficiency.
The research concludes that the delay in Solvency II’s introduction until 2016 provides an opportunity for re/insurers to focus on dealing with problems such as US asbestos now, thereby allowing reserves to be released and capital reallocated to more profitable underwriting activities.
“While it is heartening to see that the asbestos reserves of European insurers continue to be robust, the pressure from a rising asbestos ultimate and the costs associated with holding on to these liabilities are increasingly unattractive to investors,” said John Winter, CEO of Ruxley Ventures.
