This year had been kind to property and casualty insurers, until Sandy blew into town. Governors from the hardest-hit states decided to categorize the storm to maximize benefits to claimants, and Sandy's damages have been estimated to top $20 billion . Now, another threat to insurers' profits has come to light, courtesy of insurance credit rating agency AM Best: increased liability for asbestos-related injury claims.

A bit of a drag on profits
The Wall Street Journal reports that U.S. insurers Berkshire Hathaway (NYSE:BRK-A), (NYSE:BRK-B), Hartford Financial Group (NYSE:HIG), and Travelers (NYSE:TRV) stand to bear the brunt of the estimated asbestos cost increases, while AIG (NYSE:AIG) and CNA Financial (NYSE: CNA) will probably suffer to a lesser extent. The latter two companies have Warren Buffett to thank for the decreased liability: The great investor bought AIG's asbestos liability  last year for $1.65 billion, and CNA's risk  for $2 billion in 2010.

How much more will insurers have to shell out? AM Best estimates that an extra $11 billion is in the cards. Insurers have paid claims totaling more than $50 billion, with another $23 waiting in the wings. The rating agency noted that bigger and increasingly more successful claims are behind its new estimates.

Sandy weighs in, too
Sandy is shaping up to be the next most expensive storm after Katrina , and most insurance companies have announced the damage to their respective bottom lines. AIG, riding high since its governmental apron strings were finally severed , said that its losses will be around $1.3 billion after taxes , and Travelers announced post-tax losses of $650 million . The Hartford estimates much lower net losses of $230 million, with CNA posting catastrophe losses of $18 million for Q3, after taxes. Things could have been a lot worse, especially since the governors of New York, New Jersey, and Connecticut declared Sandy a tropical storm, rather than a hurricane -- opening the door to many more claims than if the latter classification had stuck.

One Fool's take
Though these two issues represent a double whammy for the P&I insurance industry, it is certainly survivable. As far as Sandy goes, the insurers had nice fat bank accounts from recent premium increases, and the storm only gives the industry more ammunition to raise them even more next year.

As unsettling as the ramped-up asbestos claim costs look, they will be spread out over several years. Both AIG and CNA are in the catbird seat here, while Buffett's bet that claim expenses wouldn't rise  hasn't paid off. Still, the Oracle had the use of those billions with which to make other investments, and this extra hit is not likely to hurt his empire. As for the others, their stock price may take a dip for a while, presenting a nice opportunity for savvy investors who know that this, too, shall pass.