Organizations with environmental exposures – or with real estate/acquisition plans that might make them start thinking about environmental exposures – have several options for including environmental insurance in their risk transfer portfolio. An evolving marketplace is changing the value of those options and may push insurance buyers to revisit their thinking.
A Soft Market – Except Where It’s Not
The environmental insurance marketplace is to a great extent softening, in keeping with the larger, gently softening trend of the overall insurance marketplace of the past few years. However, in one key area – combined policy forms that integrate general liability (GL) and professional into pollution – we have seen a retraction of capacity and increasing rate. We’re also seeing a lot of those programs break up into separate GL, professional and pollution towers, particularly as carriers broaden their capabilities, move into the international space and make changes in their underwriting approach.
Building a Combined Program for Construction
The trend in construction, where environmental issues can play a prominent part, is twofold. In many cases, we are seeing the combined professional and pollution policies breaking up into separate policy forms. But there are specialty products out there that continue to integrate those coverages.
In either case, the underwriting can be complicated. Companies looking to insure large projects against the unexpected pollutants they may find when they are, for example, excavating soil or digging a foundation will find their carrier partners scrutinizing these risks in particular. They will also be more concerned than ever with specific contaminants such as old fill materials. They will be investigating the risks association with construction and demolition debris that may be contaminated and require costly disposal efforts. The perils are of most concern in coastal or watershed areas.
What to Do
Scrutiny of risks does not always mean that those risks can’t be insured, of course. But it does mean that extra preparation may be involved to assess the risk potential and bring that to the negotiating table with the underwriter.
Preparation will also be important on the strategic side, where a review of the marketplace might indicate a potential change in strategy in terms of how environmental risks are transferred via insurance.
The environmental marketplace may be a relative newcomer in the grand scheme of things, but the marketplace is mature. Carriers will compete for business. They will, at the same time, be careful. And they may not offer combined programs that some buyers have been pleased to avail themselves of in recent years.
Now is the time to step back, consider your environmental risk situation, take a close look at the marketplace, and consider a change in strategy.
I recently talked over these issues with my Willis colleague Colleen McCarthy. Check out the video here.