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Friday, December 2, 2016

Insurance Rating Company Increases Estimate for Net Ultimate U.S. Asbestos Losses to $100 Billion

A.M. Best has increased its estimate for losses that U.S. property/casualty insurers can ultimately expect from third-party liability asbestos claims by approximately 18% to $100 billion. The $15 billion increase to the net ultimate asbestos loss estimate comes as insurers are incurring approximately $2.1 billion in new losses each year while paying out nearly $2.5 billion on existing claims. The updated figures are contained in a new Best’s Special Report, titled “A.M. Best Increases Estimate for Net Ultimate Asbestos Losses to $100 Billion.” The report also states that A.M. Best is not making any change to its $42 billion estimate on net ultimate environmental losses; therefore, A.M. Best’s view of ultimate industry losses for asbestos and environmental (A&E) is now $142 billion.

According to the report, industry funding of the $142 billion in net A&E exposures has reached approximately $124 billion, broken out by $98.1 billion in cumulative paid-to-date losses and $26.3 billion in reserves set aside for future payments. This translates into a funding rate of 88% of ultimate A&E exposures, or approximately $85 billion of asbestos funding (85% funded) and $40 billion of environmental funding (94% funded).

A.M. Best utilizes a combination of three approaches when evaluating an insurer’s A&E reserve adequacy: historic premium market share, post-1990 paid loss share (1991–2015) and three-year survival ratios. Consistent with historical trends, the industry has continued to pay out more losses than it has incurred (funded) since 2006, paying out $16.7 billion for asbestos and environmental claims over the past five years, while incurring $13.5 billion in losses. The industry has incurred $10.5 billion in asbestos losses over the past five years, while paying out $12.7 billion. A&E reserves have not declined by a significant amount, but they have decreased in nine of the past 10 years, including a 2.9% fall in 2015, with the only exception being a slight uptick in 2010.

A.M. Best believes the property/casualty industry’s asbestos losses will continue to be an issue given an unstable environment faced with evolving litigation, increasing secondary exposure cases and an increase in life expectancy. Asbestos losses continue to dominant the discussion around the industry’s A&E exposures, comprising more than 80% of total A&E liabilities. However, it is extremely difficult to quantify the industry’s ultimate loss exposure, given the evolving nature of asbestos litigation, tort reform and the growing incidence of lung cancer being linked to asbestos exposure. A.M. Best will continue to monitor asbestos litigation and losses and will periodically revisit its benchmarks as needed.

"Workers' compensation benefits have been awarded to claimants who have been exposed to asbestos and who have suffered asbestos-related disabilities. Bolger v. Chris Anderson Roofing Co., 112 N.J.Super. 383, 271 A.2d 451 (Co.1970), aff'd 117 N.J.Super. 497, 285 A.2d 228 (App.Div.1971) .The courts have recognized asbestos exposure as causing multiple disabilities, and awards have been made for occupational exposure which have resulted in a “second disease”. Even where the exposure to asbestos can be identified as occurring 50 years earlier in the course of the employment, the resultant disease has been recognized as compensable. Even if the employee's widow had knowledge of the asbestos-related disease and its relationship to the employee's disability during his lifetime, in a dependency claim, the Statute of Limitations does not bar a claim until two (2) years after the date of death of the employee." Gelman, Jon L., 38 N.J. Prac., Workers' Compensation Law § 9.20 (3d ed.)

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Jon L. Gelman of Wayne NJ is the author of NJ Workers’ Compensation Law (West-Thomson-Reuters) and co-author of the national treatise, Modern Workers’ Compensation Law (West-Thomson-Reuters). 

For over 4 decades the
Law Offices of Jon L Gelman  1.973.696.7900  has been representing injured workers and their families who have suffered occupational accidents and illnesses.