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Survey Report

Insurance Marketplace Realities 2021 – Environmental

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November 18, 2020

Breakthrough innovations in environmental analytics are creating opportunities for buyers.

Rate predictions

Rate predictions: Environmental
  Trend Range
Contractors pollution liability No change or slightly up Flat to +10%
Site pollution liability (PLL/EIL) No change or slightly up Flat to +15%
Combined environmental + casualty/professional Increase (Purple triangle pointing up) +5% to +15%

Key takeaway

Breakthrough innovations in environmental analytics are creating opportunities for buyers to better manage their environmental risks, enhance their insurance coverages and make risk management decisions supported by data, analytics and modeling.

An increase in M&A and construction activity rebounding from COVID-19 slowdowns and delays could herald a record year for environmental placements in 2021. Fortunately, the environmental insurance market (comprised of over 40 carriers) will be ready to meet this demand.

  • Incumbent markets will attempt to increase rates on their multiyear renewals, but increased appetites from their competition will keep premiums in check for clients with excellent loss histories. Elsewhere, modest increases (relative to other standard lines of coverage) will prevail for most products.
  • Former excess-surplus lines carriers, previously focused on distribution through wholesalers, entered the retail environmental market in 2020 and are expanding their underwriting capabilities/capacity with expectations of gaining market share in 2021.
  • Clients facing hardening conditions in the property and excess casualty markets are strategically locking in multiyear operational environmental programs (i.e., two to five years, where available) to mitigate future market uncertainty.
  • Analytical tools are being employed to visually represent a buyer’s exposure to emerging exposures, such as perfluoroalkyl/polyfluoroalkyl substances (PFAS) and glyphosate, as carriers and regulators continue to formulate their respective coverage and regulatory approaches to these chemicals.
  • The top five global risks identified by the 2020 World Economic Forum are environment-related (extreme weather events, climate change, human-made environmental disasters, biodiversity loss, natural disasters). While the current environmental insurance marketplace may address many of the resulting remediation and tort exposures associated with these events, it will take a combined effort with colleagues in parametric insurance and alternative risk transfer to develop holistic solutions that cover the other economic exposures that are currently beyond the scope of what the marketplace offers today.

Environmental insurance carriers continue to assess their current forms and future position relative to bacteria, viruses and communicable diseases in the wake of COVID-19.

  • As predicted, affirmative coverage for bacteria, viruses and disinfection costs have all but disappeared from site pollution forms in the wake of the COVID-19 pandemic.
  • COVID-19 and communicable disease exclusions will be more commonplace on contractor’s pollution liability forms, although coverage for mold and Legionella remains available. Each carrier’s form needs to be evaluated for potential coverage.
  • Requests to extend or modify project-specific policies for resuming construction activities are being met with resistance by carriers concerned with potential exposure to COVID-19 claims.

We are watching several claim trends.

  • As U.S. EPA and state environmental agencies implement groundwater cleanup guidance for PFAS, and other “emerging chemicals of concern,” insureds are experiencing increased claim activity associated with both site investigation and third-party litigation.
  • As buildings and jobsites begin to reopen during the COVID-19 pandemic, we expect to see an increase in the number of claims involving indoor environmental quality issues — such as mold and Legionella bacteria.
  • Claim activity related to redevelopment of brownfield properties continues — although carriers try to limit exposure by adding exclusions associated with historic fill, dewatering and voluntary site investigations.

Disclaimer

Willis Towers Watson hopes you found the general information provided in this publication informative and helpful. The information contained herein is not intended to constitute legal or other professional advice and should not be relied upon in lieu of consultation with your own legal advisors. In the event you would like more information regarding your insurance coverage, please do not hesitate to reach out to us. In North America, Willis Towers Watson offers insurance products through licensed subsidiaries of Willis North America Inc., including Willis Towers Watson Northeast Inc. (in the United States) and Willis Canada, Inc.

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