Liberty Mutual Group reported the results of its external asbestos review, which was completed during the fourth quarter of 2005 by an actuarial consulting firm.
The external actuarial firm had complete access to the company’s legal, claims, and actuarial staff to discuss the nature of the exposure, the data and other information needed to perform a comprehensive analysis of the company’s asbestos liabilities.
The consulting actuaries noted that the company’s asbestos exposure will be shorter tailed than many commercial insurers’ because the company mainly wrote primary coverage and also benefited from several manuscript policy provisions that reduced loss limits available to pay asbestos claims. The external review resulted in an indicated reserve that was approximately $60 million above the company’s carried reserves as of Sept. 30, 2005.
According to the report, the primary area of difference is in the IBNR estimate, which is for policyholders that have no reported claims as of the date of the analysis. The company is comfortable with its third quarter best estimate of required asbestos reserves and therefore will not adjust its asbestos reserves for any difference between the independent actuarial firm’s estimate and the company’s carried reserves, as both estimates are well within the range of reasonableness. In the third quarter of 2005, the company strengthened reserves by $203 million, which was approximately $50 million above the point estimate of the company’s internal actuaries and reflects management’s best estimate of the reserve requirement.
Total held reserves for asbestos liabilities (including allowance for reinsurance on unpaid losses) were $1.194 billion as of Sept. 30, 2005.
Additional information on the company’s asbestos reserves is available on the company’s Investor Relations Web site at www.libertymutual.com/investors.
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