We’ve all heard a lot in the news lately about some rather large and very damaging environmental catastrophes: the nuclear contamination that followed the earthquake and tsunami in Japan, the release of toxic sludge at a metal refinery in Hungary, and the Gulf of Mexico oil spill are just to name a few.
But you don’t need environmental catastrophes, green glowing ooze or drums of hazardous chemicals to face environmental risks, as these exposures are no longer confined to the obvious candidates.
Every day we’re learning more about new environmental exposures, seeing an increase in claims and litigation activity, a rise in regulatory and enforcement initiatives, fines and penalties, newsworthy and public-relations nightmares and a whole host of other concerns.
From my perspective, there are five main reasons to explore the environmental marketplace now more than ever:
1.) A Growing List of Exposures
The traditional environmental exposures remain (such as legacy contamination and industrial pollution), but newer exposures have emerged (and continue to emerge) over time. For example:
- Legionella Disease
- Vapor Intrusion
- PCBs in Caulking
- Several other new perils
2.) Maturing Products
The environmental insurance markets have been monitoring these new exposures, observing an increase in environmental loss scenarios and witnessing an uptick in new enforcement and regulatory developments. Consequently, the markets have responded in a favorable way by creating risk transfer solutions centered around them. Today’s environmental insurance products go far beyond just covering legal defense, clean-up costs and third-party bodily injury and property damage.
3.) Market Conditions
The current market conditions can’t last forever! While we’ve seen a lot of new insurer entrants into this space, the combination of falling prices and rising exposures may soon drive some players away (ultimately resulting in upward pressure on pricing). Buying coverage when the market is “soft” offers advantages beyond cost savings. Forming relationships with carriers that are in it for the long haul early on can be helpful as the market “hardens” and as risk profiles evolve.
4.) Rising Regulatory Bar
It’s no secret that the U.S. has generally led the pack in terms of environmental litigation, clean-up requirements, enforcements and new regulations, and that will likely continue into the foreseeable future, but the rest of the world is catching up. So, as the regulatory bar rises around the world, as we are seeing in many countries, so will the potential liabilities and exposures for companies with global operations or interests.
5.) Deal Enabler
Environmental insurance is utilized in many scenarios to help to “get the deal done”. It’s being used to secure lending, win bids on construction projects, satisfy financial assurance requirements or, more commonly, to simply get a deal across the finish line in property transactions.
Fortunately, the ever-growing list of environmental exposures, risks and concerns are matched by a broadened suite of insurance solutions and creativity, so there’s never been a better time to explore environmental risk transfer options!