Boosting reserves

AIG said last week it expects to boost reserves in its Chartis Inc. property/casualty insurance subsidiaries by $4.6 billion. Here is the breakdown:

• Asbestos, $1.3 billion before a discount. Asbestos coverage has been excluded from AIG policies since 1985.

• Excess casualty, $1 billion. During the fourth quarter of 2010, loss emergence for the excess casualty class significantly exceeded expectations, particularly in recent accident years. AIG has modified its loss development assumptions for recent and older accident years.

• Excess workers compensation, $825 million before discount. Projections in AIG's 2010 year-end loss reserve view indicated these claims continue to develop more adversely than expected, which has led AIG to revise its loss assumptions.

• Primary (specialty) workers compensation, $420 million before discount. Loss emergence for recent accident years has significantly exceeded expectations, and AIG concluded this is being driven by worsening experience. AIG has reduced its net written premiums for guaranteed-cost primary (specialty) workers compensation by almost 70% since 2007.

• Construction/commercial risk and national account business classes, about $820 million before discount. Construction and commercial risks consist primarily of primary workers compensation and general liability coverages.

• Various other classes of business, $240 million.

Source: American International Group Inc.