Travelers Sets Huge Asbestos Reserve
NU Online News Service, Jan. 14, 12:23 p.m. EST?Travelers Property Casualty Corp. announced it has boosted its asbestos reserves by $2.45 billion to $3.4 billion following the completion of its previously announced asbestos study.
The study involved an extensive review and assessment of Hartford, Conn.-based Travelers’ exposure to asbestos losses, including company’s recent claims experience and industry-wide trends.
“The study was extremely comprehensive and included a review of past settlements, all active policyholders, litigation and potential non-product exposures. The study also considered the potential for new claims from unidentified policyholders, as well as exposures to insurance industry pools,” said Robert I. Lipp, chairman and chief executive officer at Travelers.
The study also found that the vast majority of the Travelers’ exposures to asbestos losses are related to long-known policyholders. The exposures relating to policyholders submitting claims for the first time in recent years were not found to be significant, the company said.
Regarding Travelers’ decision to hike asbestos reserves to $3.4 billion, after reinsurance recoverables, up from $950 million on Sept. 30, 2002, Mr. Lipp said, “this reserve strengthening reflects a conservative view of trends that have become clearer over the last few quarters and our estimate of the projected ultimate cost of our asbestos liabilities.”
Mr. Lipp added, “we have taken this important step, while maintaining a strong capital position with significant earnings power.”
As a result of its increased reserves, Travelers will record a $1.3 billion after-tax charge for the fourth quarter of 2002, the company said.
Travelers’ fourth-quarter charge is only the latest in a series of asbestos-related hits absorbed by property-casualty insurers and other companies; in October 2002, The Chubb Corporation in Warren, N.J., took a $625 million charge to increase its asbestos reserves.
Insurers were also disappointed yesterday when the U.S. Supreme Court refused to hear an appeal of a Delaware case that would have consolidated tens of thousands of asbestos liability claims in federal court. If the action had been successful a hearing would have been held to determine whether asbestos claims based on alleged exposure to automotive friction products satisfied a court-established threshold for scientific validity.
Insurers had hoped that by securing a consolidation of cases in federal court they could prevent plaintiff lawyers’ efforts to shop for favorable venues to hear cases, according to the Alliance of American Insurers in Downers Gove, Ill.
Also yesterday, wood products company Georgia-Pacific Corporation in Atlanta announced it had suffered higher-than-anticipated asbestos liability costs in 2002 and that it did not expect to record a profit in its fourth quarter.