Perfluoroalkyl and polyfluoroalkyl substances (PFAS) are everywhere in the news lately.
Executive Summary
While insurance coverage issues related to PFAS claims are far from settled, some casualty actuaries have characterized this looming risk to insurance companies as "the next asbestos." Still, setting aside reserves to address PFAS claims is far from commonplace and traditional actuarial methods will not be applicable. Here, litigation watchers from Praedicat and Mendes & Mount describe the state of litigation and science, and actuaries from Milliman offer ideas on newer and more innovative methodologies that can help insurers set reasonable reserves.PFAS refers to a class of chemicals renowned for resisting heat, water and stains—substances that are found in everything from upholstery to nonstick pans to raincoats. Unfortunately, due to their indestructible nature, they tend to endure in drinking water and human bloodstreams, earning them the nickname “forever chemicals” because they don’t break down in nature.
Certain PFAS chemicals in varying doses have been correlated with adverse health effects and, though the science remains unsettled, a growing body of peer-reviewed research has prompted a steady increase in lawsuits that have grown exponentially in recent years.
While insurance coverage issues related to PFAS claims are far from settled, some casualty actuaries have characterized this looming risk to insurance companies as “the next asbestos.” Still, many insurers have taken a reactive rather than proactive approach, and setting aside reserves to address PFAS claims is far from commonplace.
