Property and Casualty Insurer Disclosure of Environmental Liabilities
RCED-93-108: Published: Jun 2, 1993. Publicly Released: Jul 9, 1993.
- Full Report:
Pursuant to congressional requests, GAO examined casualty and property insurers' claims for Superfund cleanup costs, focusing on the environmental and Superfund data that the top 16 property and casualty insurance companies disclosed in their fiscal year (FY) 1990 and 1991 annual reports to the Securities and Exchange Commission (SEC).
GAO found that: (1) insurance representatives have testified that the solvency of the insurance industry could be threatened if insurance companies are found liable for hazardous waste cleanup costs; (2) insurers' incurred cleanup costs and pending claims are increasing; (3) only 3 of the 16 insurance companies partially disclosed their environmental liabilities in their FY 1990 and 1991 annual reports, while some companies disclosed that they were involved in environmental claims litigation; (4) none of the insurance companies disclosed the potential costs associated with environmental claims litigation or that any of the costs materially affected the company's financial position; (5) SEC requested and obtained additional financial information from some of the companies; and (6) insurance companies did not disclose potential litigation costs, since SEC regulations requiring disclosure of environmental litigation costs apply to one claim or a set of related claims for damages that exceed 10 percent of a company's assets.
Recommendation for Executive Action
Status: Closed - Implemented
Comments: SEC has issued guidance (see Staff Accounting Bulletin No. 92 on the disclosure of potential or contingent environmental liabilities).
Recommendation: The Chairman, SEC, should revise the agency's guidance to specifically address insurance companies' disclosure of environmental liabilities. This guidance should specify that, at a minimum, insurance companies routinely disclose in their annual reports: (1) the number and type of reported environmental claims; and (2) an estimated range or minimum amount of associated claims costs and expenses.
Agency Affected: United States Securities and Exchange Commission