FEATURES
SECTOR FOCUS: ENVIRONMENTAL
A rewarding environment Environmental insurance is of critical importance for a vast array of business owners. IBA talked to experts in the sector to get a handle on the key issues, trends and opportunities in this space
IN BUSINESS, as in life, it’s pretty hard to avoid the environment. And just as contaminated water, air and soil inevitably have an impact on our bodies, so too do they take their toll on businesses engaged – wittingly or not – in activities that result in some form of pollution.
Far too many business owners operate under the impression that their liability and property insurance policies will cover them in the event of unforeseen – or foreseen – environmental degradation. However, standard policies rarely cover pollution. A business that exposes employees, other busi-
REGULATIONS THAT DRIVE THE MARKET The environmental insurance demands placed on businesses have intensified over the past five decades, largely due to the environmental liability provisions in the following pieces of legislation: CLEAN AIR ACT (1970) The same year the EPA was formed, Congress passed a law that regulates air emissions from stationary and mobile sources. CLEAN WATER ACT (1972) After decades of uncontrolled dumping led to decreased water quality and increased mercury levels in fish, Congress moved to regulate pollutant discharges into US waters. RESOURCE CONSERVATION AND RECOVERY ACT (1976) The RCRA created a regulatory scheme for dealing with hazardous waste and required facilities to prove they have the financial means to respond to a major pollution event. COMPREHENSIVE ENVIRONMENTAL RESPONSE, COMPENSATION AND LIABILITY ACT (1980) Commonly known as Superfund, this legislation established a fund to respond to major environmental incidents and made past and present owners/operators liable for cleanup costs.
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nesses or the public at large to hazardous materials can wind up facing cleanup costs, legal fees and even the relocation of facilities, any of which can be annihilating. That’s why, now more than ever, environmental insurance is a necessity for virtually any business. With environmental consciousness at an all-time high, any operation that could potentially damage an area’s air, water, soil or inhabitants will be subject to increased scrutiny. If you represent any of the thousands of American small business owners who think oil pipelines and large-scale healthcare facilities are the only ones facing these exposures, get them on the phone immediately. And if you’re unfamiliar with the environmental insurance space, now is the time to educate yourself to better serve your current and future clients.
Who needs environmental insurance? In the US, environmental insurance is required by both governmental and nongovernmental agencies to ensure that sufficient funds are available in the event of third-party damages arising from an insured’s business activities. “Although environmental insurance is not the exclusive means to satisfy these financial requirements, it is one of the more favorable options,” says Eric McCabe, national underwriting director for Great American Insurance Group’s environmental division. “The insured does not need to designate substantial collateral, and the government is more comfortable with the insurance carrier’s financials.” McCabe adds that lenders, private equity firms and landlords encompass most of the non-governmental entities that require environmental insurance, primarily as a means to supplement their due diligence. “An environmental carrier can ensure that the lender’s real estate appraisal is correct, the private equity can rely on certain warranties, and the landlord is not paying for issues
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18/01/2019 4:16:10 AM