Overall asbestos and environmental (A&E) losses may currently be a little less expensive for U.S. P&C insurers than previously projected. A.M. Best Co. has revised its view of the P&C industry's ultimate asbestos and environmental (A&E) losses, now estimating total losses to reach about $117 billion, down from the previous figure of $121 billion.

By current estimates, asbestos exposures are hovering around $75 billion (up from $65 billion), environmental losses stand at $42 billion, down from $56 billion. A.M. Best reported that these totals reflect its review of statutory annual statement Footnote 32 data for year-end 2008, supplemented with proprietary A.M. Best data.

A.M. Best relayed the following findings:

The industry posted significantly lower A&E losses in 2008 -- down nearly 50 percent -- and increased its aggregate funding for such liabilities by nearly $5 billion over the past two years.

Through 2008, the industry's incurred-to-date losses for A&E liabilities totaled more than $66 billion for asbestos exposures and nearly $35 billion for environmental costs, net of reinsurance and adjusted for two companies' significant loss portfolio transfers in 2002 and 2005.

The increase in asbestos estimates reflects ongoing, elevated levels of annual incurred losses, as well as a subtle shift of losses away from products liability claims to more costly non-products claims against more peripheral defendants.

Also affecting asbestos losses is a growing proportion of settlements in more serious cases, principally related to Mesothelioma, which is increasing the average values of such claims.

The reduction in environmental loss estimates reflects a steady decline in incurred losses since 1999, while the industry's "mega" losses relating to the petrochemical industry largely have been settled.

Paid losses remained consistently high over the past five years, averaging just over $3 billion per year for asbestos and just under $1 billion per year for environmental.

Nearly 70 percent of the industry's 2008 A&E incurred losses were concentrated among ten insurer groups, while ten insurers also drove 70 percent of the industry's asbestos losses, and ten insurer groups generated about 85 percent of incurred environmental losses.

Total A&E net loss reserves declined 8 percent, composed of a 7-percent decrease for asbestos and an 11-percent decline for environmental.

In 2008, the three-year survival ratio, a key measure of an insurer's A&E reserve adequacy, stood at 8.1 times for the total industry on asbestos claims, down from 9.5 times in 2007, as two insurers in the commercial lines segment recorded upticks in paid losses.

Source: www.ambest.com

Special Reports /

2008 A&E Losses Lowest Since 2000

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