While generally not a material drag on the U.S. property/casualty industry’s earnings, industry losses from asbestos and environmental (A&E) claims resumed an upward climb in 2012, according to a new A.M. Best Co. report.
The report said annual incurred A&E losses rose 12 percent in 2012 after a 31 percent decline in 2011. This comes amid a rising number of lung cancer lawsuits related to asbestos and evolving mass tort exposures on the environmental side.
A.M. Best said that as it continues to monitor issues related to asbestos, the current estimated ultimate industry asbestos exposure could very well increase in the medium term. In December 2012, the ratings agency had raised its estimate of net ultimate asbestos losses for the U.S. P/C industry to $85 billion from its previous 2011 estimate of $75 billion. The higher asbestos loss estimate reflected ongoing losses of roughly $2 billion per year with claim payments averaging $2.5 billion per year.
On asbestos litigation, the report noted that in addition to more traditional mesothelioma filings, the volume of lung cancer cases appears to be rising as more lawyers seek higher settlements in the face of more successful lawsuits relative to past settlements. The report pointed to industry participants’ observation that the number of such suits has begun to increase significantly.
The report said that as more tobacco lung cancer cases go to court and receive damage awards, it may be creating an incentive for asbestos plaintiffs’ attorneys to file suits alleging asbestos exposures as at least a contributor to the lung cancer.
A.M. Best said its estimate of net ultimate environmental losses remains unchanged at $42 billion. It said that while asbestos loss exposure still represents most of total A&E losses, environmental claims continue to generate roughly $600 million of incurred losses each year, with annual loss payments averaging nearly $1 billion.
A.M. Best said its view of ultimate industry losses for A&E is $127 billion. The ratings agency noted that as of year-end 2012, U.S. P/C insurers had funded, through a combination of paid losses and loss reserves, nearly $76 billion in asbestos exposures and approximately $38 billion in environmental costs.
Source: A.M. Best Company Inc.
Was this article valuable?
Here are more articles you may enjoy.