Asbestos: The Next Wave? Thomas Toce, FCAS 15 September 2014
Introduction ► The next wave of asbestos is likely to be…. Mesothelioma … the same as the last couple of waves Demography ► Why? Two reasons: Propensity to sue Page 2 15 September 2014 Asbestos: The Next Wave?
Introduction ► But first…. The poor track record of estimating asbestos Manville Trust – Asbestos Claims filing 1,000,000 900,000 800,000 700,000 600,000 500,000 400,000 300,000 200,000 100,000 0 1988 1993 1997 2005 2013 Filed claims Expected Ultimate filed claims ► Perhaps unfair… Page 3 15 September 2014 Asbestos: The Next Wave?
Introduction ► Let’s take a look at epidemiological studies Epidemiological studies scaled to actual reported mesothelioma deaths 4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 0 2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050 Rpt Meso deaths Manville (2001 Stallard) Nicholson Price & Ware 2004 ► Stallard and Nicholson imply that decay in 2014 should be 4% (0.96) with a constant second order decay of 0.9972 Page 4 15 September 2014 Asbestos: The Next Wave?
Introduction ► But are we really seeing a decay? Not for some later-tiered defendants seeing upward trends Not per CDC ► ► 3,400 3,300 3,200 3,100 Rpt Meso deaths 3,000 2,900 2,800 2,700 2,600 2,500 2,400 2,300 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Manville (2001 Stallard) Nicholson Price & Ware 2004 Rpt Meso deaths Page 5 15 September 2014 Asbestos: The Next Wave?
Introduction ► Where is the decay? Has the turning point actually been reached? 3,000 2,500 2,000 Meso deaths 1,500 1,000 500 0 2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050 2055 2060 2065 2070 2075 Rpt Meso deaths Low projections High projections Page 6 15 September 2014 Asbestos: The Next Wave?
Consider Exposure & Demographic Factors 900,000 5,000 No OSHA protection 4,500 800,000 Decrease in 4,000 Asbestos consumption in tons exposure 700,000 due to OSHA 3,500 protection 600,000 efficiency Births in thousands 3,000 500,000 2,500 400,000 2,000 300,000 1,500 200,000 1,000 100,000 500 0 - 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 2010 US Asbestos consumption Births OSHA protection efficiency Page 7 15 September 2014 Asbestos: The Next Wave?
Consider Population Occupation ► Percentage of the US Population employed in occupation exposed to Asbestos ► 1930 41% ► 1945 43% ► 1960 38% ► 1975 30% Page 8 15 September 2014 Asbestos: The Next Wave?
Consider Exposure Factors Page 9 15 September 2014 Asbestos: The Next Wave?
Modeling Assumptions Year of Exposure Factors birth Low Base High 1900 0.20 0.20 0.20 ► Asbestos consumption 1910 0.50 0.50 0.50 1920 0.80 0.80 0.80 ► OSHA measures 1930 1.00 1.00 1.00 ► Population occupation 1940 0.75 0.80 0.90 1950 0.50 0.60 0.75 1960 0.25 0.30 0.50 1970 0.05 0.10 0.20 1980 0.01 0.05 0.10 1990 0.00 0.01 0.05 Page 10 15 September 2014 Asbestos: The Next Wave?
So… what’s the answer? Demographic Model results 3,500 3,000 2,500 2,000 1,500 1,000 500 0 2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 Rpt Meso deaths Low projections Mid projections High projections Manville (2001 Stallard) Nicholson Price & Ware 2004 Page 11 15 September 2014 Asbestos: The Next Wave?
Year of birth of current deaths ► Because age distribution has a 10 year standard deviation we can’t observe decline yet Age Number of deaths in 2010 <25 0 25--34 11 35--44 26 5% of current deaths 45--54 104 born after 1952 55--64 345 65--74 805 75--84 1042 ≥85 412 1900 1910 1920 1930 1940 1950 1960 1970 Total 2745 Year of Birth distribution - 2010 deaths ► Difficulty to parameterize and test the models: Current deaths born in average in 1936 ► Only 5% of current deaths born after 1952 ► Page 12 15 September 2014 Asbestos: The Next Wave?
So… what’s the answer? Range ► High uncertainty leads to wide range of answers ► Demographic models results: Low Mid High Future number of meso deaths 43,000 60,000 77,000 ► Maybe the best way to look at it is through probability distribution: 65% chance of falling in the range 20,000 45,000 70,000 95,000 120,000 Page 13 15 September 2014 Asbestos: The Next Wave?
Conclusion ► Demographic factors may explain part of the surge in mesothelioma claims filing ► Other factors include: ► More later-tiered defendants brought into litigation ► Longevity of asbestos-containing products ► Final liability also depends on: ► Closed With Indemnity Payment ratios (“CWIP”) ► Severity ► Defendants expect a decrease in CWIP ratio ► Impact of Garlock decision Page 14 15 September 2014 Asbestos: The Next Wave?
Q&A Page 15 15 September 2014 Asbestos: The Next Wave?
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