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Berkshire most exposed to asbestos losses

Berkshire most exposed to asbestos losses

U.S. property/casualty insurers' asbestos reserves were deficient by $5 billion to $12 billion as of year-end 2014, with Berkshire Hathaway Inc. being most exposed, Fitch Ratings Inc. said in a report issued Tuesday.

Industry asbestos reserves now total $22 billion, representing about 4% of industry loss reserves, according to the Chicago-based rating agency's Asbestos Reserves Dashboard: 2015 report.

The agency said it has increased its maximum estimate of ultimate industry insured losses for asbestos exposures to $90 billion as of year-end 2014 from a previous estimate of $85 billion.

It said incurred losses continue to materialize, tied partly to mesothelioma claims and rising legal defense costs, which have been only partially offset by a reduction in new claims filings.

The report said Fitch expects asbestos reserves to continue to “bleed through” insurers' and reinsurers' earnings, rather than “resulting in severe capital shocks.”

“Industry practice remains largely to strengthen reserves as claims are paid, thereby keeping reserve levels relatively flat. The earnings drag from asbestos losses for insurers with the greatest exposure has averaged almost 1 percentage point to the group's combined ratio over the past five years,” says the report.

Fitch said in its 2014 U.S. Asbestos Liability Dashboard that it estimates U.S. property/casualty industry statutory asbestos reserves to be deficient by $2 billion to $9 billion at year-end 2013.

Berkshire Hathaway has the most asbestos reserves of all companies, with about $14 billion, according to the report. But it has assumed $12 billion of asbestos losses through reinsurance transactions, according to the report.

A spokesman for Omaha, Nebraska-based Berkshire Hathaway could not immediately be reached for comment.