Asbestos and environmental claims currently cost the property and casualty (P&C) re/insurance industry around $1.9 billion and $800 million in additional losses per year, respectively, and show no signs of slowing down, according to A.M. Best.
The rating agency has raised its estimate of the ultimate net environmental losses for the industry to $46 billion in response to the growth in ultimate loss exposure.
This represents a $4 billion increase over the previous estimate, and is due to the continued development on sites that have been found to be more toxic than originally thought, as well as the associated increase in clean-up and defence costs.
In terms of asbestos claims, A.M. Best maintained its’ net ultimate asbestos loss estimate of $100 billion, although it noted that quantifying the industry’s ultimate loss exposure is difficult, given the significant advancements in medical effectiveness, as well as developing litigation strategies.
The increase in the environmental estimate reflects the fact that the re/insurance industry continues to incur losses of approximately $700 million per year, while paying out $760 million.
Previous estimates anticipated a slow reduction in the level of claims, but A.M. Best said that the pace has not yet declined in any meaningful way.
The firm’s analysts put the combined ultimate industry losses for asbestos and environmental (A&E) at $146 billion, and noted that the industry had funded approximately 89% of it’s A&E exposure through a combination of paid losses and loss reserves.
A.M. Best added that, from 2013 to 2017, re/insurers paid out more every year than they incurred, with payments of $17.8 billion for A&E claims and $13.3 billion in incurred losses.
Asbestos incurred losses came to approximately $10 billion, and payments, $14 billion, while environmental losses came to $3.7 billion, and payments, $3.8 billion.
At year-end 2017, asbestos reserves had decreased nearly 4% to $19.1 billion, and environmental reserves, by 3.0% to $5.2 billion.
The industry’s A&E losses remain concentrated, with the top 30 re/insurance groups representing nearly 95% of the paid total and 94% of the total A&E reserves.