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Digital EditionA&E Reserves Continue Steady Decline, Even As Asbestos Losses Surge for Second Consecutive Year
The insurance industry faces a paradox in its asbestos and environmental liabilities: even as reserves have steadily declined over more than a decade, incurred losses for asbestos rebounded sharply in 2024, driven by a small cohort of major carriers, according to an analysis of statutory filing data by AM Best.
The industry’s A&E reserves totaled $19 billion at year-end 2024, down from $19.5 billion the prior year. Asbestos reserves fell 2.2% to $14.5 billion, while environmental reserves declined 3.0% to $4.5 billion. Over the past five years, the industry has paid out approximately $13 billion in A&E claims while incurring just under $9 billion in losses—a pattern that has eroded the reserve base, AM Best said
“A&E loss reserves have declined for more than a decade, as loss payments have outpaced incurred losses,” said Jieqiu Fan, associate director, AM Best.
However, the trend masks a troubling reversal for asbestos specifically, according to the report. After declining in 2021 and 2022, asbestos incurred losses surged 37.3% in 2024 to $1.5 billion, marking the second consecutive year of double-digit increases and reaching the highest level in five years.
The spike was driven by approximately a dozen large carriers, including Travelers Group, Hartford Insurance Group, Liberty Mutual Insurance Companies, and Chubb INA Group. Meanwhile, environmental incurred losses declined 23% to $0.4 billion, continuing a downward trajectory.
Paid losses also accelerated. Asbestos paid losses reached $1.8 billion in 2024, up 12% from 2023, while environmental paid losses climbed to $0.6 billion.
Concentration Among Top Carriers and Funding Adequacy
The top 30 insurer groups hold 94% of the industry’s total A&E reserves and accounted for 96% of all A&E paid losses in 2024. The concentration is even more pronounced at the top: the five largest carriers hold 44% of reserves, with Berkshire Hathaway leading at 12.3%, followed by Hartford at 9.6%.
Despite the recent loss increases, the industry remains well-capitalized. Approximately 97% of the estimated $146 billion in ultimate A&E exposures is funded through a combination of paid losses and reserves. The funding shortfall stands at approximately $3 billion for asbestos and $1 billion for environmental.
“At current payout levels, A&E reserves will be exhausted in about eight years, assuming no additional reserve strengthening,” Fan said.
Payout volatility has complicated projections—2024 saw a 12% increase in payouts after a 14% decrease in 2023, the report noted.
Environmental Litigation May Ease; Asbestos Outlook Remains Uncertain
A significant regulatory shift could alter the trajectory of future environmental losses, the report noted.
In June 2024, the U.S. Supreme Court overturned the Chevron doctrine, which had empowered environmental agencies to implement and enforce environmental laws based on their expertise for nearly 40 years. Without this deference, courts may more readily challenge environmental regulations, AM Best said. Environmental incurred losses have ranged between $0.4 billion and $0.7 billion annually over the past five years, and AM Best suggested they could decline more rapidly in coming years due to reduced regulatory enforcement capacity.
By contrast, the asbestos situation appears more intractable. AM Best maintained its estimate of $100 billion in ultimate asbestos losses and noted that “quantifying the industry’s ultimate loss exposure remains extremely difficult given ongoing litigation.”
The sharp increases in recent years, concentrated among a handful of large carriers, suggest that despite decades of claims experience, asbestos litigation continues to produce surprises for underwriters assessing this legacy exposure.
Obtain the full report here. &
