The latest financial strain on insurers that cover liability settlements for employers of asbestos workers will negatively, but not terminally affect the insurance industry’s finances, a new Standard & Poor’s article said.
The issue of asbestos liability for insurance companies has recently garnered substantial attention from industry analysts and pundits alike as several major asbestos manufacturers have filed for bankruptcy protection.
Correspondingly, there has been a significant increase in claims filed against property/casualty insurers as the number of asbestos-related defendants has increased and a new group of claimants has emerged, which have been exposed to asbestos, but do not show any sign of illness.
Several studies published by industry observers within the past few months have speculated on the amount of incremental reserves needed by the insurance industry to cover these new claims. According to these studies, which rely on an insurer’s historical market share and average payout patterns, the level of the industry’s reserve inadequacy due to asbestos liability ranges from $20 billion to $40 billion.
The article’s author and a Director for S&P’s Financial Services Department Matthew Coyle stated that S&P expects an incremental $5 billion to $10 billion of these reserves to be put up in 2001. He added that the industry continues to maintain a strong level of capital adequacy and financial flexibility to cover the impact of these reserve additions.
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