Long-tail liability claims clusters are often looked at in terms of whether they will be the “next asbestos,” causing huge losses for insurers. The term is now being used by some experts in reference to child sexual abuse lawsuits due to the rising volume of claims.
“In terms of the risks, I do believe it’s the next asbestos,” said James Murray, a Washington-based partner who leads Blank Rome LLP’s policyholder-only insurance recovery practice.
The similarities with asbestos and environmental coverage are informative, as both areas have very long latency periods extending decades, which significantly increases the risk of litigation, Oldwick, New Jersey-based ratings firm A.M. Best Co. Inc. said in its report Expanding Child Victim Compensation Laws Could Adversely Affect Insurers, published in July. “Both the volume and severity of the claims are unpredictable,” said Vicky Riggs, senior financial analyst and report co-author.
“Asbestos and environmental are the two big mass torts that got out of control,” said J. Paul Newsome, managing director for equity research at Sandler O’Neill & Partners in Chicago.
“Insurance companies and the industry did not handle these claims well. I think the insurance industry is better at handling these issues than they were in the past, but you were always worried about another asbestos that could be a significant impact on the financials of the insurance companies.”
But asbestos claims are ongoing because people are living longer and it has therefore manifested itself as a multidecade exposure, said Meyer Shields, managing director at Keefe, Bruyette & Woods Inc. in Baltimore.
“I don’t think (child sex abuse is) likely to be as long-tenured a problem as asbestos,” he said.
