US environmental losses rise to $46bn for P&C industry: AM Best
AM Best has raised the net environmental losses for the US property/casualty (P&C) industry by $4 billion to an estimated $46 billion, taking industry losses for asbestos and environmental (A&E) to $146 billion.
The rise in environmental losses is due to the continued development on original sites that have been found to be more toxic than originally thought, and the associated increase in clean-up and defence costs, AM Best said.
The increase in the environmental estimate reflects the fact that the industry continues to incur losses of approximately $750 million per year, while paying out $760 million, the agency explained.
Previous expectations factored in a reduction in these patterns, but the pace has not yet declined in a meaningful way, AM Best noted. The industry’s environmental losses have reached $46 billion, and the environmental issue will be here for years to come, the agency noted. Environmental losses also show no sign of slowing down, with the industry reporting approximately $800 million in additional losses per year.
Furthermore, asbestos losses have also not slowed down, with the P&C industry reporting an average $1.9 billion in additional losses per year over the past five years (2013-2017), AM Best said. Quantifying the industry’s ultimate loss exposure is difficult, given the significant advancements in medical effectiveness, as well as developing litigation strategies, the agency noted. The estimated net ultimate asbestos loss of $100 billion remains the same, AM Best said.
Losses incurred have been relatively steady over the past five years, as have A&E loss payments. From 2013 to 2017, the industry paid out more every year than it incurred, with payments of $17.8 billion for A&E claims and $13.3 billion in incurred losses.
Asbestos incurred losses came to approximately $10 billion, and payments, $14 billion, while environmental losses came to $3.7 billion, and payments, $3.8 billion. At year-end 2017, asbestos reserves had decreased nearly 4 percent to $19.1 billion, and environmental reserves, by 3.0 percent to $5.2 billion.
The industry’s paid A&E losses remain concentrated, with the Top 30 insurer groups generating nearly 95 percent of the total. As in the past, the Top 30 insurer groups accounted for 94 percent of the industry’s total A&E reserves.
Swiss Re has incurred the highest impact from US A&E in the past five years with an average of 7.7 percentage points on the combined ratio, according to AM Best. Also high on the list is CNA Insurance Companies with 2.5 percentage points, FM Global Group and Fairfax Financial (USA) Group, both with an impact of 2.2 percentage points, as well as Hartford Insurance Group, Everest Re US Group and Munich-American Holding Corp Cos, all of which experienced an average impact of 2.1 percent over the past five years on the combined ratio.
Get all the latest re/insurance industry news with our daily newsletter - sign up here.
More of today's news
Utilities sector most at risk from California wildfires: Fitch
AXIS merges cyber, technology units under Trueman
Glyphosate may become the next asbestos: AM Best
Lloyd’s broker AFL creates LatAm operation through joint venture
Aetna downgraded after acquisition by CVS
Ardonagh reduces loss in 2018 9M results
Lloyd’s Market Association launches claims management solution
