Press Release - OCTOBER 29, 2015
A.M. Best Special Report: Asbestos & Environmental Losses Drop Sharply in 2014, But Funding Level Concerns Remain
FOR IMMEDIATE RELEASE
OLDWICK - OCTOBER 29, 2015
According to the report, the industry has paid out a cumulative $91.1 billion in combined A&E losses and maintains a reserve of an additional $27.3 billion to fund future payments of legacy liabilities. This brings the total funded liability to 93% of A.M. Best’s aggregate of $127 billion of ultimate liabilities.
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 (1991–2014) 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 $3.5 billion for A&E claims in 2014, while incurring $2.1 billion in losses.
Over the last five years, incurred losses have averaged 85% of paid losses with total A&E reserves decreasing by just 8% over the same time period. While reserves have not declined by a significant amount, they have come down in eight of the past nine years, including a 5% fall in 2014, due to a decrease in the much larger asbestos reserves.
The industry has incurred $10.7 billion in asbestos losses since 2010 while paying out $12.3 billion. During the same time period, environmental funding totaled $3.4 billion compared with paid losses of $4.2 billion. The largest five-year percentage decline in reserves comes from the environmental side as reserves have declined 14% to $5.1 billion, while asbestos reserves have declined nearly 7% over the last five years, to $22.2 billion.
With more than 80% of total industry A&E liabilities composed of asbestos losses, asbestos continues to be the “main event” when discussing A&E exposures. A.M. Best continues to monitor issues related to asbestos litigation and insured exposures with an eye toward a possible re-visiting of its $85 billion estimate of ultimate industry losses during 2016.
To access a copy of this report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=243102 .
A.M. Best Company is the world’s oldest and most authoritative insurance rating and information source.