AM Best

Best’s Market Segment Report: Insurers’ Incurred Asbestos Losses Declined in 2020; A&E Exposures Estimate Remains on Target


Jieqiu Fan
Senior Financial Analyst
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Brian O’Larte
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Christopher Sharkey
Manager, Public Relations
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Jim Peavy
Director, Communications
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OLDWICK - NOVEMBER 11, 2021 08:35 AM (EST)
Annual incurred asbestos losses continued to decline in 2020, although overall asbestos and environmental (A&E) incurred losses were up slightly for the year as the environmental side saw an uptick, according to a new AM Best report.

The Best’s Market Segment Report, titled, “Insurers’ A&E Incurred Losses Still Declining; Funding Remains on Target,” states that annual incurred A&E losses rose slightly by nearly 2% in 2020 to $1.8 billion, following a drop of approximately 7% in 2019. Prior to 2020, annual incurred A&E losses had declined each year since 2017. Larger insurance groups that reported much lower asbestos incurred losses in 2020 than in 2019 drove the decrease in incurred asbestos losses. Incurred environmental losses were particularly low in 2019, so the $100 million uptick in 2020 represented a 10% increase.

AM Best is maintaining its estimate for net A&E losses at $146 billion - $100 billion in net asbestos losses and $46 billion in net environmental losses. Loss payments continue to outpace incurred losses. Over the past five years, the industry has paid out approximately $15 billion for A&E claims, while incurring more than $10 billion in losses. Given the relatively high-but-declining level of paid and incurred losses, AM Best expects its ultimate estimate to remain on target. Fifteen insurers account for 89% of the industry’s average annual A&E incurred losses, with Travelers Group at the top of the list, followed by Hartford Insurance Group and Berkshire Hathaway Insurance Group, Inc.

Insurers’ asbestos reserves in 2020 declined by approximately 3%, to $17.1 billion. Environmental reserves declined by a little more than 7%, to $4.9 billion. Industry funding of net A&E exposures is approximately $135 billion—$113 billion in cumulative paid-to-date losses and the $22 billion in reserves. This translates into a funding rate of approximately 93% of ultimate A&E exposures. At current payout levels, AM Best expects A&E reserves to run off within approximately eight years, barring any additional reserve strengthening.

AM 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 (1991–2020) and three-year survival ratios. The A&E-related figures are for the three main segments of the U.S. property/casualty industry: commercial, personal and reinsurance lines. The commercial lines segment holds approximately 63% of the industry’s net A&E reserves, while reinsurers hold approximately 25% and personal lines insurers the remaining 12%.

AM Best recognizes that fully funding ultimate estimates is extremely difficult, given the improvement in therapies, emerging drug combinations and early diagnosis, combined with ongoing mass tort litigation, but views the majority of insurers with material A&E exposures as well-capitalized and able to absorb any shortfalls.

To access the full copy of this market segment report, please visit .

AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City.