Allianz AG announced that it will increase the reserves of Fireman’s Fund Insurance Company, its its California-based U.S. property/casualty subsidiary, by $750 million, primarily to cover the anticipated increase in asbestos and environmental (A&E) risks.
The additional funds, scheduled to be transferred at the close of the third quarter, will be added to the existing $760 million in A&E reserves, bringing the total to $1.51 billion.
Allianz’ announcement stated that it had commissioned Tillinghast Towers-Perrin and Milliman USA to conduct a “detailed review of the concerned Fireman’s Fund insurance portfolio.” That analysis indicated that the reserves for asbestos and environmental risks should be increased. The bulletin noted that “The transaction confirms Allianz’ commitment towards Fireman’s Fund.”
Jeff Post, CEO of Fireman’s Fund, noted that following the reserve strengthening, “Our net adjusted survival ratio increases to over 13 years. Contrast that level of strength to the average industry A&E reserves — which industry experts currently estimate at about eight years — a problem that has been exacerbated by a dramatic up-tick in litigation surrounding the asbestos issue.”
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