Glyphosate, opioids and talc - candidates for the next asbestos?

Published in: Risk, Risk management, Cat risk, Corporate strategy, US - Canada - Bermuda, USA focus

Companies: Fitch Ratings, Praedicat, Bayer, Monsanto, Purdue Pharma, Johnson & Johnson, World Health Organization

Claims relating to asbestos exposure caused a catastrophic level of losses for the insurance industry. What is the potential for the scenario to be repeated with other chemicals and compounds? Paul Walsh reports

Whenever bodily injury claim losses and mass litigation is mentioned, one word will no doubt spring to insurers' mind: asbestos.

In July 2018 Fitch Ratings increased its estimate for ultimate US property and casualty insured asbestos losses to $100bn, up from its previous prediction of $90bn. Such losses are unparalleled and claims continue to roll in, but the asbestos crisis was mostly dealt with in the 1990s and no "liability catastrophes" of a vaguely similar magnitude have emerged since then.

Insurers should not enjoy peace of mind, however. Chemicals and environmental legislation might improved markedly around the world, but there are other potential compounds or substances that are creating worries about their impact on human health: in particular the trio of glyphosate, opioids and talc (GOT, see box).

California-based Praedicat has made its mission to help insurers understand liability catastrophe risks through the use of science-based analytics. Chief executive Robert Reville states the risks of GOT were downplayed when the firm started in 2012.

"We were very focused on asbestos as a precedent and when we first launched, people were saying 'asbestos happened but bodily injury and mass litigation is in the past' and that we won't see that kind of mass litigation again.

"What's interesting about GOT is that all three of them are bodily injury mass litigation events. This suggests that the idea that it had gone away was wrong."

Glyphosate - A water soluble broad-spectrum herbicide commonly used for agricultural weed control.

Opioids - A class of drugs emerging from the opioid poppy plant. Includes street drugs heroin as well as licensed painkillers such as codeine, morphine and oxycodone.

Talc - A soft mineral that is a basic silicate of magnesium, commonly used in talcum powder and cosmetics.

Cases in point

GOT compounds have been the subject of several mass litigation suits in the US.

German pharmaceutical firm Bayer revealed in its 2018 annual report, it's facing lawsuits from around 11,200 plaintiffs claiming to have been exposed to glyphosate-based products manufactured by Monsanto, a Bayer subsidiary. Glyphosate is the key ingredient in a number of Monsanto products, namely Roundup weedkiller. Plaintiffs have alleged exposure to these products has led to non-Hodgkin lymphoma and multiple myeloma.

A case in San Francisco last year saw a jury award a school groundskeeper damages of $78.6m after he alleged Roundup had caused him to contract non-Hodgkin lymphoma, Bayer has since announced it will appeal. 

In the case of opioids, Purdue Pharma, the makers of painkiller OxyContin, agreed to a $270m settlement last month in a bid to avoid a state court trial over its alleged role in opioid addiction in the US, after a case was brought by the state of Oklahoma.

With talc, consumer goods firm Johnson & Johnson lost a motion last December to reduce a jury verdict that awarded $4.7bn in damages to 22 women and their families. The plaintiffs blamed their ovarian cancer on asbestos in the company's baby powder and other talc-based products.

Opioids crisis

Of the three, the case against opioids has arguably the highest profile. Latest figures from the World Health Organization show overdose deaths from opioid usage contributes to between a third and a half of all drug deaths. According to the US Department of Health & Human Services, there are roughly 11m people misusing prescription opioid painkillers in the country.

However, Reville believes there is a long way to go for this to result in the levels of litigation seen in asbestos.

"Opioids have the ability to be as large or larger than asbestos in terms of economic losses that may result in liability.

"However, there is a lot of legal innovation necessary for this to actually result in litigation. And then there's a whole other set of coverage issues that will have to be overcome for it to result in large-scale losses for insurers."

Reville thinks opioids litigation may be resolved more like tobacco than asbestos, in the sense that with tobacco, US attorney generals brought litigation against tobacco companies but also figured out how to keep them in business.

In essence, according to Reville, opioid litigation can evolve and litigation could potentially fall on insurers but it won't be so severe as to put them out of business.

Measuring the risk

The risks around GOT are still emerging and therefore harder to quantify than many of the traditional risks insurers are exposed to.

But Reville argues it's possible to use scientific literature as a means of identifying emerging risks, estimating exposures and to conduct realistic disaster scenarios.

"When you talk about glyphosate, the course of the litigation is based upon established trials.

"The exposure in the general public is well understood, as is the prevalence of the underlying harm, so your ability to create a loss estimate with all that information is probably just as good as it is for catastrophes," he says.

For opioids, Praedicat has modelled economic losses under 16 potential scenarios. These range from as low as $56bn to as high as $815bn. However Reville is quick to stress these numbers represent “what can happen rather than what is likely to happen.”

These scenarios would lead to “very little loss” for the insurance industry as the bulk of the losses would fall upon the pharmaceutical industry.  

Reville says the development of GOT liability catastrophe modelling today is comparable with the state of natural catastrophe modelling in the early to mid-1990s, following hurricane Andrew and the Northridge earthquake. As a result of these incidents, many diverse models were developed.

"Models were still new, competitors were trying to work on how to crack the problem but there were differences as it's not a straightforward application.

"I think it [GOT modelling] is headed in the same direction."

Taking the numbers on board

If insurers are capable of quantifying such risks, the next point of consideration should be acting upon the results.

"Once [insurers] come to grips with the scale of the tail loss risk in their portfolios and the fact their strategy has been largely risk avoidance ... they are either at risk of becoming irrelevant or addressing it," Reville says.

"When they address it, it becomes a growth opportunity for insurers to enter into. But it is a choice the industry has."

Paul Walsh