Overall asbestos and environmental (A&E) losses maycurrently be a little less expensive for U.S. P&C insurers thanpreviously projected. A.M. Best Co. has revised its view of theP&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 $75billion (up from $65 billion), environmental losses stand at $42billion, down from $56 billion. A.M. Best reported that thesetotals reflect its review of statutory annual statement Footnote 32data for year-end 2008, supplemented with proprietary A.M. Bestdata.

A.M. Best relayed the following findings:

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

• Through 2008, theindustry's incurred-to-date losses for A&E liabilities totaledmore than $66 billion for asbestos exposures and nearly $35 billionfor environmental costs, net of reinsurance and adjusted for twocompanies' significant loss portfolio transfers in 2002 and2005.

• The increase inasbestos estimates reflects ongoing, elevated levels of annualincurred losses, as well as a subtle shift of losses away fromproducts liability claims to more costly non-products claimsagainst more peripheral defendants.

• Also affectingasbestos losses is a growing proportion of settlements in moreserious cases, principally related to Mesothelioma, which isincreasing the average values of such claims.

• The reduction inenvironmental loss estimates reflects a steady decline in incurredlosses since 1999, while the industry's "mega" losses relating tothe petrochemical industry largely have been settled.

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

• Nearly 70 percent ofthe industry's 2008 A&E incurred losses were concentrated amongten insurer groups, while ten insurers also drove 70 percent of theindustry's asbestos losses, and ten insurer groups generated about85 percent of incurred environmental losses.

• Total A&E netloss reserves declined 8 percent, composed of a 7-percent decreasefor asbestos and an 11-percent decline for environmental.

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

Source: www.ambest.com