Canadian Underwriter

A&E reserves remain inadequate: A.M. Best

October 8, 2003   by Canadian Underwriter

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The U.S. p&c industry remains under-funded for potential future asbestos and environmental (A&E) claims, says a new study by A.M. Best. Commercial insurers, and to a lesser extent reinsurers, are under-reserved by almost 40%, the rating agency predicts.
Thus far, the industry has racked up incurred losses of US$45 billion on asbestos and US$31 billion on other environmental claims. But as of the end of 2002, unfunded A&E liabilities total US$45 billion, says A.M. Best. Nonetheless, this is an improvement over the shortfall of US$53 million estimated at the end of 2001.
Asbestos claims continue to mount, with US$8 billion incurred in 2002, up from US$4 million in 2001. The rating agency notes that while many companies have taken sizeable reserve charges on asbestos, others have not yet done so, and more such moves can be expected before yearend.

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