Asbestos Losses Rise in 2017

1/3/2018

A.M. Best's Special Report, "Asbestos Losses Continue to Rise; Environmental Losses Remain Stable," recently reported that property and casualty insurers' payouts for asbestos claims increased by 9% to total $3.2 billion for 2017, thereby surpassing the long-term average of $2.4 billion. This result departs from what unfolded in 2016 when asbestos-related loss payouts declined. The report states that a 24% year-over-year drop in incurred asbestos losses fueled an overall 17% decline in asbestos and environmental incurred losses in 2016. It is ultimately estimated that the net asbestos losses for U.S. property and casualty industry is $100 billion, and the net environmental losses are estimated to be $42 billion.

Additional notable findings in the report:

  • Over the past five years, the industry paid out $17.6 billion for asbestos and environmental claims while incurring $13.6 billion in losses.
  • Industry funding of net asbestos and environmental exposures of $142 billion reached approximately $127 billion; the breakdown of which is $102 billion in cumulative paid losses and $25 billion in reserves for future payments.
  • This equates to a funding rate of 90% of ultimate asbestos and environment exposures-approximately $87 billion in asbestos funding and $41 billion in environmental funding.
  • At the current payout rate, and without strengthening the reserves, all asbestos and environmental reserves will be depleted in roughly seven years.
  • Unlike asbestos loss payouts, which have exceeded $2 billion each year since 2012-2016, environmental losses have been more stable. However, the potential for larger settlements remains a risk as original sites are found to be more toxic than originally determined. It is believed that the industry has funded most of its environmental liabilities since the majority of the "mega-losses" have been settled.

Despite a drop in incurred asbestos losses, this report shows that asbestos claims payouts have actually increased in 2017. However, improvements in early diagnosis and treatments makes it difficult to predict the industry's ultimate loss exposure. A.M. Best believes that asbestos losses will continue to be an issue given the evolving nature of asbestos medicine and litigation.

Governo Law Firm has represented clients in environmental and toxic tort claims for three decades. We regularly lecture and publish articles relating to the scientific, medical, and legal developments in environmental and toxic tort claims, including asbestos, lead, mold, and chemical exposure. If you have any questions or would like more information, please contact David Governo at dgoverno@governo.com or Alec Pine at apine@governo.com.