The financial challenges presented by asbestos liabilities are not fading away as most insurance professionals have long hoped.
Executive SummaryDeclining death rates from prostate cancer and a precipitous fall in the incidence of smoking may seem to have little to do with P/C carrier reserving for asbestos liability claims. But William Wilt and Alan Zimmermann of Assured Research see a link and cite these among the reasons that actuarial models systematically underestimate exposures.
In fact, A.M. Best raised its estimate of ultimate asbestos liability losses by $10 billion to $85 billion in late 2012. More recently, insurers including Chubb, American Financial Group, Allstate, Hartford and Travelers all increased the charge taken for asbestos in 2013 over that of 2012.
Industrywide, year-end 2013 statutory data reveals that direct asbestos payments rose to $3.2 billion—well above the $2.5 billion paid the two preceding years. The industry stepped up its reserving activity as well, incurring about $2.0 billion of losses compared to the $1.6 billion in each of the two preceding years.