Asbestos To Affect Ratings, Moody's Says

Asbestos To Affect Ratings, Moody's Says

NU Online News Service, Mar. 27, 9:49 a.m. EST?Underfunding of asbestos liabilities may be the principal driver of rating downgrades of property-casualty insurers in 2002 and beyond, Moody's Investor's Service said today.

The New York-based rating agency announced the publication of a new report entitled, "Rising Asbestos Losses Pressure Ratings of Commercial Insurers."

The announcement said that asbestos losses have begun to figure prominently in its credit analyses of U.S. property and casualty insurers.

Moody's Vice President and Senior Credit Officer William Wilt said: "We expect that the weight of paying asbestos claims will begin to appear more commonly as a rating driver, and that management of the problem will gain prominence in our credit reports and commentaries.

Citing the "expanding universe of businesses becoming enveloped by the asbestos cloud," Moody's said that many commercial insurers will need to raise their recorded loss reserves to appropriately reflect the impact of recent trends on ultimate payments from asbestos-related claims.

"Now companies that merely used asbestos-containing products on their premises or in their own production process find themselves facing litigation," Mr. Wilt said in a statement, suggesting that their insurers would need to respond to the wave of litigation as well.

According to Moody's Managing Director Ted Collins, updated estimates of the extent of the exposure for insurance companies by industry observers present a "startling gap" between the ultimate cost of asbestos claims and the amount that had been anticipated by the insurance industry.

While the Moody's report notes that several insurers took prominent charges to strengthen their asbestos loss reserves in 2001, Mr. Wilt said that Moody's believes that 2002 and the following years "will likely be tainted by asbestos-related loss reserve increases."