Marketplace Realities 2018: Environmental

November 6, 2017

Market update

The one thing

Changes in regulation and enforcement under the Trump administration could change the environmental liability landscape considerably; but they may not materialize and if they do, changes to underwriting appetite are not expected as a result.
  • The full damage and devastation caused by the hurricanes of 2017 are not yet known and will likely be felt for months to come. However, lessons learned from Superstorm Sandy and Hurricane Katrina suggest that the majority of environmental claim activity will arise from unexpected clean-up costs and/or pollution legal liability caused by the spreading of historic/pre-existing contamination, landfill containment breaches, floating drums of chemicals and storage tanks, sewerage authorities system back- ups and mold damage.
  • Insurers continue to compete for displaced AIG business on pricing, while employing creative solutions to the limited availability of engineering data.
  • The marketplace continues to offer ample choice. Some carriers are expanding capacity, lines of coverage, underwriting staff and geographic reach.
  • New site pollution + GL products entered the marketplace in 2017, expanding the field and likely stemming a hardening market for this product line. As expected, the monoline site pollution market has experienced increased competition (especially for displaced AIG PLL business) and a continued soft market for all but the most difficult site pollution placements.
  • Sustained construction activity and soft market conditions have fueled demand for pollution liability products and their combination with builders risk coverages. Furthermore, site pollution and contractors pollution wrap-up products are being coordinated to address both pre-existing and construction-related exposures at project sites.
  • States are taking a closer look at financial assurance wording offered by carriers for storage tank and closure policies to ensure coverage for various loss scenarios and to provide more favorable choice of law provisions.

Claim update

Price prediction

Contractors pollution liability
-10% to flat

Site pollution liability (PLL/EIL)
-10% to flat

Combined environmental + casualty/professional
Flat to +10%
  • The calamitous 2017 Atlantic hurricane season has offered many reminders that, while property policies may include some pollution-related coverage, insureds with environmental insurance policies who expect losses should place their carriers on notice and carefully follow the environmental claim reporting instructions, with close attention to any emergency response coverage provisions and policy nuances. Claims should be submitted immediately. If cost estimates for remedial activities are available, they should be sent to the carrier for approval. When submitting proposals, insureds should request that the carrier approve the costs as “reasonable and necessary” pending a coverage determination.
  • Increasing claims based on mold and indoor air quality issues in the hospitality/real estate/ health care space have resulted in carriers attempting to mitigate this exposure with per- door/room deductibles and other coverage limitations.
  • Highly publicized catastrophic claims have increased regulatory scrutiny on transportation/ railroad, mining, energy and pipeline exposures, resulting in the reevaluation of these sectors by underwriters and inspiring an ongoing push to shift liability to users of the facilities.
Contractors pollution liability -10% to flat Site pollution liability (PLL/EIL) -10% to flat Combined environmental + casualty/professional Flat to +10%