Insurers Mostly Unprepared for ‘Third Wave’ of Asbestos Exposure

Insurers Mostly Unprepared for ‘Third Wave’ of Asbestos Exposure

Source: http://www.propertycasualty360.com, January 21, 2014
By: Phil Gusman

Insurers may be underestimating their exposure to a coming “third wave of asbestos liabilities” by relying on outdated assumptions and not accounting for factors such as longer life expectancy and advances in medical knowledge, a research firm says.

In a January briefing, Assured Research, a research and analysis firm for insurance and investment professionals, states, “Some insurers have bravely, or naively, reported that the asbestos environment is little changed in recent years. We disagree.”

The firm argues that an “evolving body of medical literature” combined with shifting societal and media trends point to “a third wave of serious asbestos claims that will likely stain the financial results of insurers for years to come.”

Assured points out asbestos illnesses have a long latency period that could reach beyond 40 years. With rising life expectancy overall, the firm says people are more likely to live “into their asbestos-induced disease,” meaning they will live long enough to discover their illness and then report a claim.

Advances in medical research should also concern insurers, the briefing states. It points to studies indicating that the risk of asbestos-induced lung diseases can be heightened not only by long-term occupational exposures, but also by short but intense non-occupational exposures, such as from a home renovation.

Furthermore, the briefing cites studies, including one published in the American Journal of Respiratory and Critical Care Medicine, that find a “malignant synergy” between asbestos exposure, asbestosis and smoking.

As such, Assured says the typical plaintiff in this third wave may be longtime smokers with non-occupational exposure to asbestos. Assured says, “We believe the third wave will be dominated by lung-cancer claims which are ostensibly lower quality than those of mesothelioma because the cancer was predominantly caused by smoking rather than asbestos.”

The firm adds, “Nevertheless, large numbers of even lower-quality claims could raise pressure on defendants anxious to settle and minimize nuisance suits.”

Assured also says the increasing use of high-resolution CT scans, rather than “cloudier X-rays,” may increase the diagnosis of asbestosis, and social-media outlets make prospecting for claimants by lawyers easier.

Worse for insurers, Assured believes current models used by consulting firms “and most likely insurance companies” rely on assumptions crafted in the mid-1980s and recalibrated once in the later 1990s, and do not account for the new data on medical research and life expectancy. The models, says Assured, generally only account for occupational exposures, for example.

Speaking to the need to once again recalibrate models, Assured says, “The result, we expect, would be higher forecasted claims and an explanation for the series of annual ‘surprises’ that many insurers relay each time they fund rising asbestos payments with yet another ‘one-time’ annual reserve charge.”

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