Brett Lawless, director, Fitch Ratings, commented that mold remediation costs have been additionally impacted by higher remediation standards.

"These standards were imposed by insurers to effectively address the new mold environment and avoid disputes, which could lead to litigation," he said.

Fitch said it is important to note that catastrophic events such as hurricanes and earthquakes will become more expensive due to the higher remediation standards. The company said this trend had already been observed with Hurricane Allison.

During the first half of 2002, Fitch found that Texas remained the focal point of national mold related claims activity, despite its reduction in mold claims in 2002 versus 2001.

Texas, Fitch said, has garnered the greatest claims activity primarily as the result of homeowners' insurance policy language, which, until recently, did not specify that claims would be covered only in relation to 'sudden and accidental' damage.

The high mold claims level in Texas, in addition to the policy language, was driven by the high density of people living in areas with a warm and humid climate, and by a trend of significantly higher jury awards in recent years, Fitch said.

The study found that from a ratings standpoint, mold, in and of itself, will likely not cause negative rating adjustments.

"Although Fitch recognizes that losses have [been] incurred and will continue, Fitch does not view mold as the next asbestos. Instead, it is viewed as one of numerous problems that exposes property and casualty insurers to sizable claims," said Mr. Lawless.