A new report issued by ratings firm A.M. Best indicates that U.S. insurers can expect to pay an additional $11 billion in asbestos-related insurance claims above and beyond the $23 billion already set aside for future expenses. The same report shows that the industry has already paid out some $53 billion for such claims during the last quarter-century.
According to a Wall Street Journal article, A.M. Best indicated in their report that the rise in costs can be attributed to the increasing cost of each claim, the success rate of experienced mesothelioma attorneys, and the long latency period of diseases such as malignant mesothelioma. All of this means that “sizable losses are likely to continue for years,” according to the study results released last week.
Some of the insurers who have seen significant asbestos claims throughout the last few decades include Travelers, Hartford Financial Services Group, Berkshire Hathaway, CNA Financial Group, and Lloyd’s of London. Dozens of others have been hit with smaller claims.
Many asbestos diseases, including both asbestosis and mesothelioma, can take anywhere from two to five decades to develop and become evident. Hence, asbestos lawsuits are still being filed more than 30 years after the government imposed rules about the use of the toxic material. Therefore, insurers are still paying out on policies they sold as much as 50 years ago, when asbestos was widely used in all sorts of products and in many industries. Mechanics, machinists, insulators, plumbers, electricians, and a wide variety of other tradesmen may have suffered asbestos exposure on the job during those years.
A.M. Best analyst Gerard Altonji said: “Given the long latency period between exposure to asbestos and the manifestation of mesothelioma, as well as the very large number of people exposed over a great many years…it is likely that asbestos losses will continue to develop for many years to come.”
Though the additional $11 billion is not enough to cripple the industry, Altonji and his colleagues add, investors with the various insurance companies involved have reacted negatively when an insurer announces additions to its asbestos reserves.