P&C Insurers Face Mounting Asbestos Claims Despite Shrinking Reserves: S&P

The U.S. P&C industry lowered net asbestos reserves to $12.37 billion in 2024, maintaining a downward trajectory since the last reserve increase in 2010. Environmental liability net reserves also declined to $3.94 billion in 2024, falling below the $4 billion mark for the first time since 1996, the report said.

However, the asbestos reserve reduction masks a troubling shift in underlying claims activity, according to S&P. Net incurred asbestos losses and loss adjustment expenses reached $1.27 billion in 2024, a significant jump from $986.2 million the previous year. Calendar-year payment obligations also climbed to $1.49 billion, suggesting the industry is paying out more than anticipated while simultaneously reducing its liability cushion.

This divergence signals weakness in reserve models that have guided carrier strategy for over a decade, according to S&P.

The environmental liability segment showed similar pressure, with net reserves falling for a fourth consecutive year to $3.94 billion despite net incurred environmental losses holding relatively stable at $422.7 million, the report said.

Reserve Concentration and Emerging Volatility

Four major carriers account for a substantial share of industry asbestos exposure, according to S&P. Berkshire Hathaway leads with $1.67 billion in reserves, followed by The Hartford with $1.43 billion, American International Group with $1.34 billion, and The Travelers Companies with $1.31 billion. These four carriers, along with 11 others, collectively hold approximately 90% of total industry net asbestos reserves, creating significant concentration risk.

Individual carrier experiences illustrate the volatility within this concentrated landscape. Travelers reported the highest net incurred asbestos losses among U.S. carriers at $242 million in 2024, then added $277 million to reserves in the third quarter of 2025, per the report. “This pattern reflects persistent volatility in asbestos liabilities driven by expanding claim profiles and sustained litigation activity,” S&P said.

Meanwhile, AIG experienced a dramatic spike in net incurred asbestos losses to $84.7 million from just $10 million the prior year, driven by adverse developments in prior-year exposure that the carrier partially offset through a reinsurance agreement with Berkshire Hathaway’s National Indemnity Company, resulting in no net impact n AIG’s income statement, the report said.

Environmental liabilities demonstrate similar unpredictability among major carriers. S&P noted.

Liberty Mutual’s environmental losses surged to $87.7 million in 2024, suggesting initial loss estimates proved inadequate as claims developed. Travelers has consistently reported environmental losses exceeding $90 million annually over the past five years, underscoring the challenges of managing legacy pollution exposures, according to S&P.

Capital Management Pressures Ahead

The divergence between declining reserves and rising claims activity carries significant implications for the insurance industry, S&P said.

“The combination of rising net incurred losses and elevated payment levels in 2024 suggests that the ‘tail’ on these decades-old policies may be longer than many carriers anticipated, with implications for reserve adequacy and capital management extending well into the future,” S&P said. &