Fitch: Insurers Are Under-reserved for Asbestos Litigation
More people are figuring out that insurers were and remain under-reserved for asbestos litigation. Below, the text of a June 16, 2016 press release from Fitch.
CHICAGO, June 16 (Fitch) Fitch Ratings has published a new Dashboard Report on U.S. property/casualty (re)Insurers’ asbestos liability exposures. Fitch estimates industry asbestos carried loss reserves totaling approximately $22 billion at year-end 2015, may be deficient by a range of $5.3 billion — $12.7 billion. This estimate is based on projected ultimate all-time industry incurred losses of $90 billion, and several potential future loss payment scenarios. The industry’s 2015 survival ratio was relatively unchanged at 8.9x versus the prior year, and remains considerably below Fitch’s target of 11x — 14x. Fitch calculates the survival ratio by dividing total reserves by a three-year average of total paid losses. This survival ratio has been adjusted by Fitch to normalize paid losses for large individual settlements and reinsurance transactions. Over the last two years, asbestos-related paid losses have significantly exceeded annual incurred losses, reducing total reserves and generating a lower reported survival ratio. Continuation of this trend in combination with lower incidence of new claims and increased settlement actions could lead to a future reduction of Fitch’s target survival ratios. Asbestos losses continue to create an earnings drag for the industry and insurers with meaningful asbestos exposures. For a group of 25 insurers with the largest U.S. asbestos exposures, continued asbestos incurred losses have added nearly one percentage point to the group’s aggregate combined ratio over the past five years. Fitch does not expect near term rating actions that are driven by asbestos related claims as losses from this peril are not likely to severely affect capital, but are likely to remain a continued impediment to better earnings and return on capital. The ‘Asbestos Liability Dashboard’ is available on Fitch’s website at ‘www.fitchratings.com’ or by clicking on the link. Contact: Douglas M. Pawlowski, CFA Senior Director +1-312-368-2054 Fitch Ratings, Inc. 70 West Madison St. Chicago, IL 60602 Jeremy Graczyk Associate Director +1-312-368-3208 Media Relations: Hannah James, New York, Tel: + 1 646 582 4947, Email: firstname.lastname@example.org. Additional information is available at ‘www.fitchratings.com’. Asbestos Reserves Dashboard 2016 here