With the use of so-called ‘forever chemicals’ beginning to result in lawsuits, Praveen Gupta examines the risks for the insurance markets.

Losses related to per- and polyfluoroalkyl substances (PFAS ) – referred to as the ‘new asbestos’ – ought to serve as a warning for insurers on the regulations and liabilities. However, are the lessons being learnt? PFAS are widely used in shampoo, feminine hygiene products, mobile phone screens, wall paint, furniture, carpets, adhesives, food packaging, cooking surfaces such as Teflon, firefighting foam, and the insulation of electric wire. PFAS are also used by the cosmetic industry in most cosmetics and personal care products, including lipstick, eye liner, mascara, foundation, concealer, lip balm, blush and nail polish.

Other products containing PFAS include: stain-resistant and waterproofing treatments on carpets, textiles, furniture and other products; packaging; additives in polishes, waxes, paints and cleaning products; protective coatings and sealants; additives to hydraulic fluids and lubricant; and aqueous firefighting foams and pesticides.

Asbestosis

For new-gen underwriters, it is worthwhile to reflect upon the near collapse of Lloyd's of London triggered previously by asbestosis. Asbestos was used extensively in Great Britain in a wide range of products, but particularly in insulation and building materials, following World War II. Widespread exposures during the 1950s through to 1970s led to a large increase in asbestos-related disease in Great Britain.

Inhalation of asbestos fibers can cause a number of serious diseases, most of which affect the lungs or pleura (the external lining of the lung). All of these have a long latency. However, for cancers such as mesothelioma and lung cancer, cases are often rapidly fatal following disease onset, while conditions such as asbestosis may progress over time to seriously affect normal daily activity and lead to complications that can be fatal. 

View from the US

The asbestos litigation crisis has been called the longest-running mass tort in US history, involving more than 8,400 defendants and 730,000 claimants, according to the RAND Corporation .

Asbestos played a vital role in American commercial product manufacturing throughout the 20th century. It was used in thousands of products before the introduction of regulations in the 1970s. The US has announced a ban  on the only form of asbestos currently used or imported into the country, decades after most developed nations began phasing it out.

It is linked to about 40,000 US deaths every year from lung cancer, mesothelioma and other cancers. Use of the carcinogen has gradually declined over the years, but it still lingers as a construction material in millions of homes and buildings throughout the country.

Lloyd’s of London

Lloyd’s was impacted by old policies written in the US that gave general liability protection. Claims on these policies arising from asbestosis and pollution clean-up policies were triggered by both policies written directly by Lloyd’s as well as those reinsured by it. 

It was also affected by the ‘London market excess of loss’ (LMX) spiral. Some of its syndicates took out excess-of-loss policies with other syndicates, which in turn took out reinsurance with others, and so on. This left some syndicates ‘holding the baby ’, as Andrew Duguid explains in his book On the Brink.

Once hailed as a ‘magic mineral’, the mining and usage of asbestos surged with the Industrial Revolution. Factories and manufacturers embraced this fire-resistant material for insulation and machinery parts.

This ‘magic mineral’ found its way into countless products and industries. Construction materials, automotive parts and even household appliances incorporated asbestos for its fire-resistant and insulating properties.

Ships, steam engines and power-generating facilities relied heavily on asbestos components. Despite growing health concerns, commercial production continued to thrive until stricter regulations emerged in the late 20th century.

Health concerns about asbestos emerged in the early 20th century. Factory inspectors in Britain noted the harmful dust in asbestos textile factories as early as 1898. By the 1920s, physicians began linking asbestos exposure to lung damage and respiratory diseases.

By the 1930s, studies had established a clear connection between asbestos inhalation to serious health risks. The public became increasingly aware of these dangers in the 1960s and 1970s through media reports and workplace safety campaigns.

However, many asbestos companies concealed  the risks for decades. This led to widespread use of asbestos continuing well into the late 20th century. Compensation claims from workers affected by asbestos-related diseases cost more than $100bn (£75.3bn). 

The story of asbestos therefore serves as a stark reminder of the importance of thorough safety research before widespread material adoption.

History repeating?

PFAS is an umbrella term encompassing human-made chemicals used to make products stain-and grease-resistant. There are some 12,000 substances identified as PFAS on the United States Environmental Protection Agency's PFAS datasets. PFAS have been patented since the 1940s and have been used in a wide range of consumer and industrial products since at least the 1950s. 

PFAS were hailed due to their ability to overcome the natural limitations of fire, oil and water. PFAS have been used in so many products and in so many contexts that they are described by many as being ubiquitous – even more so than asbestos . They are commonly referred to as ‘forever chemicals’ because they do not degrade over time.

Scientists from the Centers for Disease Control (CDC) found four common PFAS in the blood serum of nearly everyone they tested. Though more than 95% of Americans may have PFAS in their blood, finding a measurable amount of PFAS in the bloodstream does not establish that the level of PFAS will cause negative health effects. 

A recent update from Hinshawlaw.com explains: “Industry exposures have been difficult to quantify due to evolving science, the ever-present nature of PFAS compounds, and difficulties with identifying sources and timing of contamination. PFAS-related litigation plainly represents a significant exposure to insurers and reinsurers, and their policyholders and ceding companies, in view of the ubiquity of the substances and their use, rising claim frequency, large settlements, and additional defendants being brought into litigation.”

Hide and seek

According to a new study  published in Annals of Global Health, DuPont and 3M – the leading manufacturers of the chemicals – had preliminary evidence of PFAS toxicity as early as the 1960s, and knew broadly about the dangers the chemicals pose by 1970.

Dr Nadia Gaber, the first author of the paper, said in a statement: “This research is important to inform policy and move us towards a precautionary rather than a reactionary principle of chemical regulation.”

The revelations of what the two companies knew about the harms of PFAS, were the product of discovery in two lawsuits: 1998’s Tennant vs DuPont , in which the plaintiff complained that DuPont dumped more than 7,100 tons of PFOA-laced sludge onto his property; and 2002’s Leach vs DuPont , a class action suit in which more than 80,000 West Virginia plaintiffs charged the company with contaminating the local water supply with PFOA and PFOS.

Data research company Praedicat estimates that the US’s cleanup costs for PFAS-contaminated water alone could exceed $400bn (£301bn) for insurers. Such amount does not include potential losses in product liability, personal injury, and director and officer lawsuits. If this turns out to be true, losses may be beyond the financial resources of the property and casualty insurance industry. 

PFAS litigation

Hinshawlaw.com, quoting Law360 , explains: “With the litigation floodgates now opened, there are thousands of cases pending across the US. More than 6,400 PFAS-related lawsuits were filed in federal court between July 2005 and March 2022. These cases have resulted in some eye-opening settlements, such as a 3M settlement of $850m (£640m), a $69.5m (£52.3m) settlement involving Wolverine Worldwide, a $23.5m (£17.7m) settlement involving Taconic Plastics, and a $17m (£12.8m) settlement involving Johnson Controls.”

In 2021, Dupont de Nemours Inc, its affiliate Corteva Ins, and a spin-off entity Chemours Co, agreed to set aside $4bn (£3.01bn) for future PFAS liabilities. Among other claims, these companies in June 2023 agreed to pay $1.18bn (£890m) to settle a class action involving public water systems serving large portions of the US population.

The science and proof of PFAS-related bodily injuries and damages are still developing, substantial causation issues continue to exist, and no specific disease tied exclusively to PFAS has yet emerged that is similar to mesothelioma from exposure to asbestos.

While insurers need to be wary about how the ‘new asbestos’ will impact the industry and their balance sheets, this may not end here. Wouldn’t their saying ‘no’ to carry such risks pre-empt another societal misadventure? The long tail of opioids and weight loss  drugs has just about started wagging. An interplay, for instance, of ‘old’ and ‘new’ asbestos outcomes with emerging climate risks could perhaps result in shades of a polycrisis . Shouldn’t they therefore look before they leap at a ‘new’ PFAS?

This article is also published in The Journal. illuminem Voices is a democratic space presenting the thoughts and opinions of leading Sustainability & Energy writers, their opinions do not necessarily represent those of illuminem.