Net ultimate asbestos losses for the U.S. property/casualty industry have risen once again. They’re now at $100 billion, and that’s $15 billion higher than the previous estimate, according to a new A.M. Best report.
A number of factors appear to be behind that rise that may have no end in sight.
“The continued evolution of asbestos medical effectiveness through improved therapies, emerging drug combinations, and early diagnosis, combined with ever evolving litigation strategies, continues to make it difficult to put finality on the ultimate costs associated with asbestos liabilities,” the report said.
As part of that reality, the estimate reflects a continued trend “that the P/C industry continues to incur approximately $2.1 billion in losses per year while paying out nearly $2.5 billion,” A.M. Best said. “With no way of knowing where the end is, and given the total funding for the industries’ asbestos losses has now reached nearly $85 billion, it is clear that the asbestos issue will continue for years to come.”
Other findings in the report:
No change has been made to the estimated net ultimate environmental loss of $42 billion.
A.M. Best sees ultimate industry losses for asbestos and environmental (A&E) as hitting $142 billion.
The P/C industry paid out more losses than it has incurred since 2006. This means it paid out $16.7 billion for asbestos and environmental claims over the past 5 years, but incurred $13.5 billion in losses.
Annual incurred A&E losses have fluctuated in recent years. For example, they jumped 10 percent in 2015 but decreased more than 20 percent in 2014.
Incurred losses for asbestos ticked up 3.6 percent in 2015, and environmental losses soared 33 percent over the same period.
At current payout levels, asbestos and environmental reserves will be gone within 8 years and 7 years, respectively, assuming there is no additional reserve strengthening.
A&E loss payouts jumped 14 percent in 2015, driven by Travelers ($824 million), Chubb/INA ($311 million) and Liberty Mutual ($280 million) payouts.
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