According to recent reports from some of the largest U.S. insurers, asbestos claims are on the rise.

You may be surprised to hear that insurance companies actually study asbestos-related issues. But why?

Well, you may have already guessed that life insurers and health insurers would know about asbestos-related illnesses and deaths. But you may not realize that many asbestos defendants rely on property and casualty insurance coverage to pay at least part of their compensation to asbestos claimants, those who have been diagnosed with mesothelioma. For this reason, asbestos litigation is a hot topic for the insurance industry.

When an asbestos lawsuit is filed, an insurance company may not be the defendant, but its lawyers are nearby. Payment of settlements and court judgments often includes money that asbestos defendants obtain from their insurance policies. Companies may even end up transferring these insurance policies, along with other assets like stock, to their asbestos bankruptcy trusts.

Although asbestos claims reportedly decreased between 2003 and 2010, there are signs that the trend is reversing. This summer, three of the nation's largest insurers reported increases in their asbestos-related claims and losses during the first half 2011.

In the 1990s, asbestos claims cost insurers billions of dollars and some almost collapsed under the liabilities. In fact, some insurers were accused of helping asbestos manufacturers hide the risks of asbestos exposure. That's why it's no surprise that major insurers are preparing for more asbestos-related losses.

Insurers are preparing by increasing their reserves. AIG, for example, added more than $1 billion to its reserves earlier this year to address asbestos exposures. Reserves are the amounts kept by insurers to cover their debts to policyholders (e.g. asbestos defendants with insurance policies). The amounts kept in reserve represent actual or potential liabilities. Reserves can be likened to saving for a rainy day.

Actuaries who work for insurers spend a lot of time researching risks, looking at historical data and estimating how much is needed for future losses. That's why insurers often increase their reserves for future catastrophe losses after especially active and destructive hurricane seasons.

One of the reasons insurers are currently increasing their reserves is that the number and severity of asbestos-related claims has recently increased. According to the credit rating agency Moody's: "Increases in both the frequency and severity of mesothelioma and other cancer claims, increased legal costs, and an expansion of defendants to smaller, more peripheral insureds [e.g., non-manufacturers] are the primary drivers of the increase in expected losses." There are suggestions that insurers are also concerned about the development of new, expensive medical treatments for diseases like mesothelioma.

Given the extensive research that goes into calculating reserves, they can be a good indicator about the future of asbestos claims.

Most property and casualty insurance policies have excluded coverage for asbestos liabilities since the mid-1980s. But given 20- to 50-year latency periods for asbestos-related diseases, new claims will continue to develop for many years. Asbestos defendants may be able to submit these claims to their insurers under policies that were in place well before the 1980s.

In 2002, the actuarial firm Tillinghast-Towers Perrin projected that $200 billion would eventually be paid out for asbestos claims. Over half of that amount would flow to the insurance industry with $60 billion being paid by U.S. insurers and re-insurers, $62 billion to foreign insurers and re-insurers and, finally, $78 billion to actual defendants.

Claims have long been expected to continue for many years. But recent warnings by credit agencies and increases in insurer reserves suggest that there may also be a surge in claims over the next year.

Recent developments in the insurance industry and predictions about the size of future claims offer an important reminder: Asbestos claims are substantial, inevitable and will last for many decades.

There have been many calls over the past decade to adopt legislation and litigation reform to reduce the number of asbestos claims by people with non-malignant conditions. Much attention has been paid to allegedly fraudulent and greedy claims.

But it is important to remember that poor decisions in the past unnecessarily exposed people to asbestos and created a health crisis. This crisis will plague not just businesses, but hardworking individuals and their families for many more decades.