Asbestos claims not catastrophic to insurers-S&P
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NEW YORK, August 1 (Reuters) - A flood of asbestos
liability claims are a significant but not catastrophic threat
to the U.S. insurance industry, though some ratings downgrades
could result, Standard & Poor's said Wednesday in a new report.
"What is certain is that commercial carriers are likely to
incur high litigation costs as asbestos liability continues to
gain national attention and plaintiffs' attorneys seek access
to insurer's deep pockets," the ratings agency said.
One big concern for the insurance industry is that the
number of companies plagued by asbestos lawsuits is growing,
S&P said.
Because most of the major asbestos producers have filed for
bankruptcy protection, lawsuits are now targeting companies
that only used asbestos products, S&P said.
"The implications to the insurance community are
potentially devastating," S&P said.
Still, insurance companies are likely to see only "a modest
number of downgrades," given the industry's adequate capital
and financial flexibility, S&P said.
Since the beginning of 2000, at least eight companies named
in asbestos lawsuits have filed for bankruptcy protection,
including building materials manufacturer USG Corp. ,
which sought protection from creditors last month.
LOSS ESTIMATES AS HIGH AS $65 BLN
Recent studies have estimated insurers face a $20 billion
to $40 billion gap in reserves to cover asbestos liability, but
the shortfall is likely to fall at the lower end of that range,
S&P said. About $5 billion to $10 billion in asbestos-related
reserves are expected to be added by the insurance industry
this year, the ratings agency said.
Ratings agency A.M. Best Co. estimated in May that property
and casualty companies could face as much as $65 billion in
total asbestos-related costs. Other industry studies have
pegged insurers' asbestos-related losses at $60 billion.
Loss estimates may be overstated because many claims are
being filed by workers who were exposed to asbestos but have
not yet shown signs of illness, S&P said, and the validity of
those claims has not been established.
Those types of claims are escalating because attorneys are
rushing to "front-load" all possible claimants ahead of pending
tort reform, S&P said.
Without tort reform, the industry could face even bigger
woes than asbestos, S&P said.
"Asbestos will come and go, but exposures such as mold,
construction defects and electromagnetic waves are looming in
the background and threaten the long-term financial strength of
the industry and individual insurers," S&P said.
223-6325,
dena.aubin@reuters.com))
REUTERS
Rtr 15:31 08-01-01 |
