Filed Under:Markets, Commercial Lines

Moody’s: Recent Increase in Asbestos Claims a Warning for U.S. Insurers

NU Online News Service, Aug. 15, 1:39 p.m. EDT

Recent disclosures by three insurance companies regarding increased asbestos claims are a “warning flag” for those companies and the U.S. property and casualty industry as a whole, according to Moody’s Investors Service.

In its Weekly Credit Outlook, Moody’s notes that The Hartford, MetLife and American Financial Group have all said asbestos claims increased over the last two weeks. The Hartford reports a pre-tax charge of $290 million due to increased asbestos reserves, and American Financial reports a pre-tax charge of $28 million. MetLife did not disclose the impact on its reserve estimates, Moody’s says, but the company did say that new asbestos claims increased by around 14 percent during the 2011 first half relative to the same time period in 2010.

“Increases in both the frequency and severity of mesothelioma and other cancer claims, increased legal costs, and an expansion of defendants to smaller, more peripheral insureds were cited as the primary drivers of the increase in expected losses,” Moody’s explains.

Moody’s adds, “For the industry generally, the resurgence of asbestos concerns is brought on, in particular, by higher mesothelioma/personal-injury awards and an aggressive plaintiff’s bar.” The rating agency also cites a higher proportion of financially strained defendants in asbestos-related settlements, increasing severity in claimants’ health conditions and greater medical diagnoses of mesothelioma cases as underlying factors.

Moody’s notes that, until recently, asbestos claims “had been on the back burner for most commercial insurers,” as tort reform measures from the early 2000s resulted in declining losses.

“The recent announcements of asbestos losses, however, are reminders that these liabilities remain a significant credit risk for the industry,” Moody’s says, adding that the ongoing stream of reserve additions, the long duration of the liabilities, and uncertainties regarding future claim emergences and settlement costs suggest that the issue will “remain an earnings drag for some time to come.”

Top Story

2014 has become the year of the auto recall, and the numbers are staggering

It’s been a record-setting year for automakers, but not in a good way.

CE & Training

One Low Price for Complete Access to All Courses

Choose from National Underwriter's complete library of courses available in your state to get the credits you need quickly and affordably. Take advantage of the Open Pass Package for only $49. Click here to start your training today!

More Resources

Comments

eNewsletter Sign Up

PropertyCasualty360 Daily eNews

Get P&C insurance news to stay ahead of the competition in one concise format - FREE. Sign Up Now!

Mobile Phone
         

Advertisement. Closing in 15 seconds.