Who recently said insurers are under-reserved for asbestos litigation despite several years of increasing reserves ? The multi-disciplinary team of Hartley, Wilt, Schwartz and Ciavarra, in our white paper from late this summer on asbestos science and litigation. CNA made us look good a couple of weeks later when it raised its asbestos loss numbers, which flow through Buffet/Berkshire. The market, it was said, had not seen that coming.
Now, Travelers has once again raised its reserves for asbestos litigation. This year’s increase of $ 224 million was identified in an October 20, 2015 press release. The pertinent portion of the press release states:
“Net favorable prior year reserve development primarily resulted from (i) better than expected loss experience for the property product line related to catastrophe losses for accident years 2011, 2012 and 2014 and non-catastrophe losses for accident years 2013 and 2014, (ii) better than expected loss experience in the general liability product line for both primary and excess coverages for accident years 2005 through 2013, reflecting a more favorable legal environment than the Company previously expected, (iii) better than expected loss experience in the workers’ compensation product line for accident years 2005 and prior and (iv) better than expected loss experience in the Company’s operations in Canada, partially offset by (v) a $224 million pre-tax increase to asbestos reserves.
The asbestos reserve strengthening, which resulted from our annual in-depth asbestos claim review that was completed in the third quarter, was driven by increases in the Company’s estimate for projected settlement and defense costs related to a broad number of policyholders. The increase in the estimate of projected settlement and defense costs resulted from recent payment trends that continue to be higher than previously anticipated. While the overall view of the underlying asbestos environment is essentially unchanged from recent periods, there remains a high degree of uncertainty with respect to future exposure to asbestos claims.”