The U.S.property and casualty industry's net incurred asbestos and environmental lossesand loss adjustment expenses increased on a year-over-year basis in 2015, drivenin part by heightened levels of adverse prior-accident-year development at unitsof American International Group Inc.

Net incurredasbestos losses and LAE approached $1.70 billion on an industrywide basis in 2015,marking an increase from $1.53 billion in 2014. Net incurred losses and LAE forenvironmental claims emanating from policies written in 1986 and years prior increasedto more than $752 million from approximately $578 million. Unadjusted for inflation,the 2015 sum was the highest experienced by the industry since 2004.

The AIGP&C group as consolidated by SNL accounted for $379.2 million of the industry'snet incurred asbestos losses and LAE and $123.3 million of the net incurred environmentallosses and LAE. It marked the first time since AIG's Eaglestone Reinsurance Co. and Berkshire Hathaway Inc.'s National Indemnity Co. entered a retroactive reinsuranceagreement in 2011 that the group's net incurred asbestos losses and LAE led theindustry. AIG's net incurred asbestos losses and LAE approached $1.39 billion in2010.

The asbestosreserves had been ceded to Eaglestone, a reinsurer of select run-off exposures,by members of AIG's combined pool through a loss-portfolio transfer. Eaglestonethen retroceded most of its asbestos exposure, excluding accounts that AIG believeshave been reserved to their limits of liability, to National Indemnity. The agreementcontains a $3.5 billion aggregate limit. A total of $1.85 billion in reserves hadbeen initially ceded under the agreement; total cessions as of Dec. 31, 2015, amountedto $2.16 billion.

Eaglestoneexplained in the management's discussion and analysis section of its that the netincurred asbestos losses had been primarily attributable to adverse developmenton reserves that it retained as well as those retroceded to National Indemnity.The company said the development flows through net incurred losses on a gross basis,and the National Indemnity cession is reflected in other income. In 2015, Eaglestonereported $217.7 million in retroactive reinsurance gains in 2015, up from $9.1 millionin 2014.

The netincurred environmental losses and LAE were spread across the AIG combined pool members,including National Union Fire InsuranceCo. of Pittsburgh Pa., AmericanHome Assurance Co. and LexingtonInsurance Co.

AIG reportedtotal prior-year unfavorable reserve development of $4.12 billion in 2015, accordingto its most recent 10-K,with the reserve build largely concentrated in primary and excess casualty linesas well as run-off insurance lines — a reporting segment that includes asbestos,1986-and-prior environment and certain other run-off environmental exposures. Ona statutory basis, AIG's U.S. P&C companies generated adverse prior-year developmentof $3.35 billion, according to data reported on Schedule P, Part 2 of annual statements.

Fourother U.S. P&C groups joined AIG in posted net incurred asbestos losses andLAE in 2015: Travelers Cos. Inc.,The Hartford Financial Services GroupInc., CNA Financial Corp.and Zurich Insurance Group Ltd.For Travelers and The Hartford, the 2015 values marked declines from 2014 levels.

The $101.3million in net incurred asbestos losses and LAE for the Zurich group, meanwhile,exceeded the amount it had incurred in the previous three calendar years combined.CNA's Continental Casualty Co.,like Eaglestone, had ceded its asbestos liabilities to National Indemnity. It postedincome of $109.9 million associated with retroactive reinsurance ceded in 2015.The CNA agreement has a $4 billion aggregate limit, and Continental Casualty saidin its March 31 quarterly statementthat the remaining amount available on an incurred basis was $1.2 billion.

CNA acceleratedits previously scheduled review of its asbestos and environmental pollution exposuresto the first quarter from the second quarter in response to National Indemnity'snotice that its review of the company's asbestos reserve position indicated a "substantialincrease" in reserves, according to its 10-Q. Findings of an increase in anticipated future expensesassociated with the termination of coverage, as well as higher anticipated payoutsassociated with a limited number of historical accounts that have significant asbestosexposures, led the company to record unfavorable development during the first quarter.

At ContinentalCasualty specifically, the company reported $48.6 million of net incurred asbestoslosses and LAE in the first quarter. It also reported net incurred environmentallosses and LAE of $26.2 million as compared with $15.7 million through full year2015. Continental Insurance Co.'sfirst-quarter net incurred asbestos and environmental losses and LAE $97.4 million and $27.8million, respectively. CNA said it posted unfavorable development for environmentalpollution exposures during the first quarter, reflecting what it described as higher-than-expectedseverity.

AIG'snet incurred environmental losses and LAE in 2015 more than doubled from 2014 levels,but its overall amount lagged that associated with the U.S. P&C units of as the group is currentlyconsolidated following ACE Ltd.'s January acquisition of Chubb Corp.

, a subsidiaryof the legacy ACE group, and FederalInsurance Co., a unit of legacy Chubb Corp., accounted for $74.3 millionand $54.7 million of the combined organization's net incurred environmental lossesand LAE of $157.3 million. Century Indemnity houses certain run-off exposures associatedwith several ACE affiliates, including most of the former group's asbestos and environmentalliabilities.