ASBESTOS WORKING PARTY FINDING COULD HIT UK PROFITABILITY

Rating agency Moody's has warned that the report last week from the UK Asbestos Working Party, which roughly doubled the estimated cost of mesothelioma-related claims between now and 2040 could have a near-immediate impact on the profitability of some UK-based insurers. Moody's said that the observed mesothelioma experience since 2004 had already led insurers to increase their provisions to some extent. However, it added that "the Working Party's revised estimate could lead to a number of those with UK asbestos exposure to conclude that they face the prospect of having to pay more claims than previously expected over the next 30 or so years. If so, this will prompt an increase in asbestos provisions that, in turn, will impact profitability". Moody's noted that UK insurers' asbestos reserves generally made up a small proportion of total reserves, so the immediate credit implications for UK insurers were "not material". But it warned that "there remains the risk that asbestos-related claims costs could spiral upward over the longer term".