Insurance Business UK 5-Star Environmental

SPECIAL REPORT

2021

ENVIRONMENTAL INSURANCE IBUK recognises the experts who deliver the benefits of insurance as an instrument to deal with environmental challenges

CONTENTS

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Feature article .............................................. 2 Methodology ................................................ 3 5-Star Award Winners .................................. 5 Top Environmental Brokers ......................... 7

SPECIAL REPORT

5-STAR AWARDS 2021: ENVIRONMENTAL INSURANCE

INSURING A RISKRESILIENT FUTURE THE WORLD can be a dirty place. Left unchecked or uninsured, pollution events can lead to high cleanup costs and legal expenses as a result of historical or ongoing contamination.

According to AXA XL, there are four areas of concern for the environmental insurance industry going forward. First, there’s damage from extreme weather. Not expected to diminish anytime soon, climate change-driven events frequently lead to the release of pollutants, increasing exposure to cleanup costs and other environmental liabilities. Second, there are chemicals. Litigation in 2018 regarding a popular weedkiller has led to similar litigation of PFAs, also known as ‘forever chemicals,’ which have been found in many household products.

“In the last year I have seen a steep change in the general awareness and prioritisation of environmental issues.

So, by default, we are seeing more value being placed on our products” Emilie Walsh, McGill and Partners

Rounding out the quartet of trends are airborne diseases, such as Legionnaires’ disease, and mold.

To address similar concerns, Insurance

MOST COMMON EFFECTS OF AN EIL EVENT Business interruption, which leads to loss of profit

Statutory liabilities such as first party clean-up costs

Third-party clean-up costs for biodiversity damage

Tort liabilities, including bodily injury, property damage, trespass, nuisance or obstruction

Legal costs

Reputational damage

Source: Marsh Commercial

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Business UK hosted a roundtable discussion in April featuring leaders in the field. Two of the participants were Emilie Walsh, partner in environmental liability at McGill and Partners, and James Alexander, environmental practice leader at Lockton Companies.

After starting out as an environmental consultant, Walsh switched to insurance to focus on environmental liability 10 years ago. Since 2019, she’s been with McGill and Partners, based in London but operating internationally.

“It has been a growing insurance sector over the past two decades, as drivers for environmental insurance are on the rise,” she says. “But in the last year I have seen a steep change in the general awareness and prioritisation of environmental issues. So, by default, we are seeing more value being placed on our products.”

Walsh thinks clients and brokers need to be educated more on what environmental

impairment liability (EIL) insurance is and the gaps in pollution coverage in their existing property & casualty insurance programmes.

Meanwhile, Alexander characterises the UK environmental insurance sector over the past year as “vibrant, diverse, positive, problem solving and rapidly maturing despite the relatively low gross written premium compared to other lines. The post-pandemic environmental, social and governance [ESG] renaissance could be the tipping point for wider uptake.”

Walsh believes that in the near future, the general liability market could tighten as underwriters price for or remove sudden and accidental pollution cover. For her, this is a crucial distinction between the UK market and the “more mature” US market, where insurers are less likely to include pollution coverage.

“This, teamed with more prevalent regulatory enforcement, drives wider purchase of the

for natural damage claims increasing in a parallel trajectory”.

Growth of policies and claims When it comes to trends in environmental insurance, Alexander says he’s seen stable premiums and slightly tighter coverage, but the changes have been bigger in the US than in the international market.

“Premium remains stable, coverage is slightly tightening, bigger changes in the US compared to the international market,” says Alexander.

“Loss trends are large on some large premises policies, following regulation and tighter enforcement intervention levels.”

Walsh says claims are still predominantly for catastrophic situations, which don’t happen regularly, but as the number of policies increases, so does the number of claims. Examples include claims for fuel storage leaks, waste recycling centre fires and brownfield site remediation,

“The post-pandemic environmental, social and governance (ESG) renaissance could be the tipping point for wider uptake” James Alexander, Lockton Companies specialist cover,” she says.

“This is particularly the case in higher hazard industries like mining, up- and downstream oil and gas, and waste management operations. The London environmental insurance market will likely see more opportunity to fill this gap in the non-US space.”

Alexander believes that “[in the near future], we will see technical innovation and application of big data increase both in availability of insurance with the potential

including odour issues. She also notes claims related to per- and polyfluoroalkyl substances in the US. And of course, climate change (CC) is an ever-present concern in the environmental insurance sector. “Severe weather events and conditions can be attributed to CC, and these in turn cause or exacerbate pollution conditions,” says Walsh. “As clients start thinking more seriously about their impact on the environment, they also think about their environmental

METHODOLOGY ‘Market-leading’ is a phrase many insurance companies use when describing their products. This year’s 5-star winners in environmental insurance can claim that title on the back of hard market insight from the people who matter most: insurance brokers.

To select the best environmental insurance providers for 2021, IBUK surveyed hundreds of brokers to gain a keen understanding of what insurance professionals think of current market offerings. Brokers were first quizzed on what features they thought were most important in an environmental insurance policy and then asked how the insurance providers they dealt with rated those attributes. Insurers were measured on the strength of their relationships with brokers, ability to handle claims, underwriting expertise and, most importantly, the strength of the individual products they provide.

96% of brokers said underwriting expertise is most important when choosing an insurance provider

89% said claims payment/ processing is the most important attribute

85% said policy flexibility/ customisation is their primary consideration

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SPECIAL REPORT

5-STAR AWARDS 2021: ENVIRONMENTAL INSURANCE

MAIN ESG RISKS FOR BUSINESSES

Climate change

Animal welfare/testing

Environmental degradation

Human rights

Protected sites and species

Controversial weapons

Unsustainable practices

Bribery and corruption

Source: Allianz

damage and pollution exposures and therefore consider potentially transferring liabilities.

“The ESG factors are worth mentioning and clarifying. Because it has the word ‘environmental’ in it, people often think there is a direct link with environmental liability. However, ESG requirements do not necessarily translate into a liability. As corporations look to report on these matters and take action to improve the E in ESG, this might more clearly identify their risks and therefore liability, which in turn opens conversations about environmental insurance.”

What brokers are looking for For this year’s issue of the 5-Star Awards in environmental insurance, IBUK surveyed hundreds of brokers on what types of coverage were most important to them. Leading the pack is EIL at 91%.

“Indirectly, CC means more pollution events and therefore a risk driver to buy environmental liability insurance, but this has not necessarily translated into a significant uptake of EIL policies,” says Walsh.

“EIL policies are, and have been, paying claims for CC-derived pollution events for many years,” says Alexander. “It’s the existential threat to

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biodiversity from CC that many are still ignoring.

Exclusionary ESG values have a larger effect on liability markets than the EIL markets.” He also says EIL is most critical for enabling business activity.

“Our biggest challenge is the prioritisation of EIL insurance,” says Walsh.

“In a hard market, in which we arguably remain, the price increases on the larger insurance programs — property and excess casualty — means that we are even further down the list of insurance priorities. However, this also represents an opportunity where clients can look to other products to alleviate risk transfer costs.”

In second place is historical pollution coverage (pre-existing exposure) at 89%. Walsh posits that her transactional mergers and acquisitions clients are most likely to value this coverage over anything else. Alexander cites this coverage as the best “to deal with the legacy of the past”.

The next most critical type of coverage is site/ premises liability at 86%, followed by transportation of pollutants as cargo at 81%. “Fuel storage and distribution companies will value site liability as well as transportation coverage,” says Walsh.

In fifth place is product pollution at 76%.

Rounding out the pack are contractors’ liability at 75% and professional liability at 64%.

“General contractors and fuel delivery companies [need] contractors’ pollution liability [CPL],” says Walsh.

“We are seeing more uptake of contractors’ pollution liability insurance across the board, as it is often required by contract, but particularly in Canada, where there is now a requirement to hold $5m limits of CPL cover if signed up to a Canadian Construction Association contract.”

Meanwhile, Alexander says contractors’ pollution liability is important to cover mobilisation and exacerbation.

Expertise is paramount IBUK’s survey also asked brokers what qualities they look for in their environmental insurance carriers.

In first place, 96% of the participants said that underwriting expertise was most important.

“This is fundamental and goes hand in hand with speed of response and service,” says Walsh.

“Environmental insurance can often be an afterthought or a policy that needs placing in a short timeframe, so dealing with underwriters who know what the client needs and are able to deal with complex risks in the more hazardous areas is important.”

Alexander notes that underwriting expertise allied to appetite and capacity is important.

Second was claims payment/processing at 89%. “This is ultimately what the client is buying,” says Walsh. In the third spot was flexibility/customisation of policies at 85%, while competitive pricing came in fourth at 84%.

“In the environmental insurance market, the biggest competition is still the client opting not to purchase the product,” Walsh says. “Therefore, price is a major factor in recommending policies, when balanced out with coverage provided.”

Finally, rounding out the survey was access to risk mitigation partners at 77%.

2021

ENVIRONMENTAL INSURANCE

Aspen

RSA Environmental

Chubb

SCOR

Liberty Specialty Markets

Zurich

2021 Recognising the best products, policies and services in the market based 100% on research and recommendations from customers

5-Star Brokerages

5-Star Construction

5-Star Insurance Technology Providers

5-Star Environmental

5-Star Marine

5-Star MGAs

5-Star Professional Indemnity

If you would like further details on our research, please get in touch via email at meghan.bille@keymedia.com

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5-STAR AWARDS 2021: ENVIRONMENTAL INSURANCE

TOP ENVIRONMENTAL BROKERS IN THE UK As environmental challenges intensify, these outstanding brokers have highlighted the value of insurance in managing their clients’ environmental risks

ENVIRONMENTAL INSURANCE has become increasingly critical as a growing number of organisations take stock of their environmental impact and protect their operations from risks posed by accidents and natural disasters.

IBUK’s conversation with six pioneers in the country’s environmental insurance sector provides a closer look into the nature of this profession.

Among these experts are an environmental practice leader with a background in arboriculture and waste management engineering, an environmental engineering specialist with an entrepreneurial spirit, an environmental liability insurance specialist focusing on complex environmental risks, an environmental liability and casualty insurance specialist concentrating on the European and London marketplaces, a specialist in using insurance to mitigate climate change risks, and an environmental insurance expert with experience converting

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METHODOLOGY IBUK went above and beyond for this report and determined the UK’s top environmental brokers based on a peer-recommendation basis. First, the IBUK research team contacted environmental insurance brokers in the country. Then, the team asked them which insurers they use, which brokers they recommend and who is the most knowledgeable broker. Based on these conversations, the winners were determined based on their expertise in environmental insurance, years in the industry and knowledge of environmental risks.

polluted lands into viable development projects. For all of them, it’s a rewarding job with extra importance these days.

“The market is evolving on a daily and weekly basis,” says James Alexander, environmental practice leader at Lockton Companies and a Top Environmental Broker. “It’s a great place to work, and the relevance of environmental security to corporate and society entities has never been more important.”

“The environmental liability market is

broad in responsibilities and specialist in nature,” says Emilie Walsh, partner in McGill and Partners.

“Although I haven’t been able to save the environment by strapping myself to a tree, I considered that enabling access to specialist technical expertise in the event of a pollution incident and limiting damage to our precious environment is a good alterative. I feel privileged to be part of a team that’s fully dedicated to providing clients with real environmental broking expertise.”

EMILIE WALSH Partner McGill and Partners

E

milie Walsh is a partner at McGill and Partners, specialising in environmental liability insurance. After working as an environmental consultant, Walsh joined the insurance industry, where she has been active for more than a decade in underwriting and broking, focusing on complex environmental risks. She has assisted multiple international clients and dealt with placements across a range of industries such as manufacturing, construction, oil and gas, heavy industry, mining, mergers and acquisitions.

As examples, to address contractors’ risks, she has placed stand-alone contractor pollution liability policies for multibillion-dollar construction projects as well as SMEs. In the mining sector, Walsh has placed cover for rehabilitation of existing mines, facilitated additional capacity for sudden and accidental pollution cover and obtained full environmental impairment liability cover for operational sites.

In areas where obtaining pollution cover poses a challenge, placements have been made feasible due to her strong relationships in the market and her deep understanding of the complexities of pollution risks and insurance programme structures. She believes that in the environmental liability market, which is broad in responsibilities and specialist in nature, her role is to enable access to specialist technical expertise through insurance solutions so that when a pollution incident occurs, environmental damage can be mitigated.

JAMES ALEXANDER Senior vice president and environmental practice leader Lockton Companies

J

ames Alexander has led the environmental practice at Lockton Companies since June 2020. He is responsible for the production, programme design and placement of environmental risk internationally (except in the US). His focus areas include assisting clients in understanding the extent and nature of environmental risks, the coverage available and the placement of policies.

His most notable policy placements are in Gabon, Australia, Mexico and Israel.

Alexander also has world-leading experience in insuring de-watering activities, waste storage facilities and environmental liabilities faced by companies as they transition to a low-carbon future.

Alexander started his career in 1989 with Shanks and McEwan, where he specialised in waste management engineering. He began underwriting in 1996 in London before broking with WTW. From 2003 to 2014, he owned and operated an arboricultural contracting business focused on biodiversity protection and restoration, while producing biomass fuel for green power generation. He previously headed the nternational EIL practice of WTW, overseeing a period of rapid growth in premium volume and bespoke wording drafting.

Alexander believes that his duty is to “consistently stay ahead of incoming challenges [to help clients] prepare, meet their risk management goals and protect their organisation even during uncertain times”.

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SPECIAL REPORT

5-STAR AWARDS 2021: ENVIRONMENTAL INSURANCE

DUNCAN SPENCER Director EDIA

JO NEWSON Director (account executive/broker) Willis Towers Watson

J

o Newson specialises in environmental liability and casualty insurance from a risk management and insurance placement perspective. Having joined the Willis Towers Watson environmental team as a consultant in 2015, Newson’s role includes strategising, placing and servicing commercial insurance programmes in the European and London marketplaces, including large and complex insurance and reinsurance placements, global programmes, acquisitions and divestments, and specialist occupancies such as energy and mining, real estate/hospitality, public utilities, waste and recycling, construction, and manufacturing/ logistics. She is responsible for insurance placements in all territories outside of North America.

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D

uncan Spencer has worked in environmental engineering and insurance for 30 years, splitting his career between engineering, underwriting and, most recently, broking.

He established EDIA as an independent broker focused exclusively on the use of insurance to manage environmental risks.

Now in its tenth year, EDIA has developed a valuable network of clients such as developers, property owners, local authorities, regulators and industrial operators, as well as trusted advisors including consultants, remediation specialists and lawyers.

Working with underwriters, Spencer continues to assist in the development of the market, pushing the scope of cover available and creating unique solutions to the challenges that clients face.

EDIA distinguishes itself from the competition by applying various methods to clearly communicate these solutions, enabling clients to understand the role of insurance in supporting their transactions.

Spencer feels a sense of fulfilment when the products he arranges allow otherwise difficult risks to be insured so that customers can manage potential environmental threats.

MATHEW HUSSEY Environmental director, construction Gallagher

A

n expert in environmental insurance, Mathew Hussey has worked on international projects such as major brownfield and regeneration sites, corporate operational environmental risks, renewable energy, waste recycling operations and infrastructure.

Hussey has focused on standard environmental insurance programmes as well as alternative risk transfer solutions, including bringing innovative long-term financial provision products to the market, emphasising innovation, pragmatism and understanding clients’ needs. He started his career as an environmental consultant with technical and management duties for contaminated land projects in Europe and Australia. Having developed an interest in environmental liability, he joined an underwriting company that provided environmental insurance.

Hussey has been co-vice president of the Environmental Industries Commission working group for contaminated land, has participated in a charity project steering group that promotes low-carbon renewable energy innovations to attract investments and has contributed to environmental publications.

He works with the Gallagher UK ESG (environmental, social and governance) business group looking at how ESG may impact the company and how to support clients.

JUDITH GOLOVA Head of environmental insurance Marsh

J

udith Golova supervises the environmental product line, pipeline development, business planning/review and strategic insurer relationships at Marsh. Since she joined the company in 2006, Golova has advised clients on environmental risk management and brokered specialist environmental insurance options. She has in-depth knowledge of environmental issues, policies and regulations, as well as pollution loss scenarios.

Prior to joining Marsh, Golova was an environmental consultant on special projects for consultancies, the Environment Agency and a local authority. An active member of Marsh’s sustainability working group, Golova focuses on the role of insurance in mitigating climate change risks. Her skills are valued by Marsh clients from a wide range of industry sectors such as waste management, energy production, real estate, food and beverage, construction, manufacturing, chemicals, and others. She was promoted to the position of team leader in 2017.

Golova has done both indoor and outdoor work, thanks to her scientific and analytical background. Her considerable international experience includes projects with the United Nations Environmental Programme in Switzerland, environmental consultancy firm AECOM in the Netherlands and the UK, and research institutes in Australia and the Netherlands. She has also performed volunteer work in China. Being fluent in English and Dutch and having moderate skill in German and French, her language proficiency facilitates her task of communicating the important relationship between insurance and environmental risk management.

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SPECIAL REPORT

5-STAR AWARDS 2021: ENVIRONMENTAL INSURANCE

2021

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