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Thursday, November 29, 2012

Reserves for Asbestos Losses Anticipated to be Deficient

Fitch Ratings estimates industry asbestos reserves to be deficient by $2 billion to $8 billion at year-end 2011. Asbestos reserves make up approximately 4% of total property/casualty industry reserves with approximately 50% of reserves concentrated in five insurers.

In a new report, Fitch examines a range of loss scenarios and future payments for asbestos losses up to an ultimate industry loss of $85 billion. Based on recent development experience and its latest analysis of loss payment scenarios, Fitch's target industry survival ratio is 11x-14x.

The reported industry survival ratio for asbestos liabilities increased modestly to 10.3x in 2011 from 10.1x in 2010 and 9.9x in 2009, indicating that incurred losses have expanded at a faster rate than paid losses in recent years.

Fitch's analysis reveals that the (re)insurance industry remains strongly capitalized with the capacity to absorb future asbestos claims without risk of material capital depletion. While Fitch does not anticipate broad rating actions related to asbestos, the ratings of individual companies could be adversely affected by the severity of reserve deficiencies relative to capital.

The full report is available on the Fitch web site at ''.

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