Fitch Estimates Asbestos Litigation Insurers are Under-reserved by $2-9 billion

Yesterday, Fitch issued a “Dashboard Report”  (registration required) estimating liability insurers are under-reserved for asbestos litigation by $2-9 billion. The report begins as follows, but is worth reading in its entirety and includes some graphics:

“Asbestos Reserves Remain Deficient Fitch Ratings estimates U.S. property/casualty (P/C) industry statutory asbestos reserves to be deficient by $2 billion−$9 billion at year-end 2013, based on estimated ultimate industry losses of $85 billion, total paid losses of $53 billion and current reserves totaling $23 billion. Asbestos reserves make up nearly 4% of total industry reserves. The industry 2013 survival ratio was 10.2x versus Fitch’s target of 11x−14x. Berkshire Hathaway, Inc. has assumed a large portion of industry reserves through retroactive reinsurance agreements, which is reflected in its GAAP results. Continued Steady Incurred Loss Expansion U.S. P/C insurers’ reported incurred losses relating to asbestos exposures averaged approximately $2 billion annually for the last five years. Domestic companies with material asbestos-related incurred losses in 2013 include Liberty Mutual Holding Co., Inc. ($236 million), The Travelers Companies, Inc. ($190 million) and Factory Mutual Insurance Company ($152 million).”