In a world where the top five global risks identified by the 2020 World Economic Forum are environment-related, increased exposures and liabilities are setting the market up for a complete evolution.
The environmental insurance market continues to evolve in terms of coverages, capacity and rates offered. And while the market has survived the “year that wasn't," as some dub 2020, it is continually adapting to mitigate potential losses.
“The environmental insurance industry continues to be very strong, with roughly 60 carriers and managing general agents offering some form of environmental insurance," says Stacy Brown, president and CEO, Freberg Environmental Inc. “While the industry is healthy, several carriers have had large losses in specific market segments leading to appetite contraction or, in some cases, pulling out of a specific segment."
2020 saw many environmental carriers “add COVID-19 or communicable disease-related exclusions, but you have to look a little further there," says Jeff Slivka, president, national environmental and construction professional liability practice, RT Specialty. “Some of these policies may include viruses within pollution conditions. In other cases some carriers are removing the word 'virus' from the definition of pollutant, so they're not necessarily attaching a specific exclusion; they're removing the certainty that 'virus' is recognized as a pollutant."
As the country begins to get back on track again, construction has been increasing around the country. “Certain states cut back on construction as a result of the pandemic, while other states kept it going," says Mary Ann Susavidge, chief underwriting officer, environmental, AXA XL. “This impacted the contractors pollution professional space."
Contractors pollution is one of the areas of environmental insurance considered to be a profitable line of liability business. “The contractors pollution liability market is fairly strong and I see that continuing in the future, at least through 2021 and into 2022," Slivka says. “Coverage has never been broader, and pricing has never been lower."
Yet, “amid COVID-19, we may potentially see greater exposures with restoration and industrial contractors cleaning or remediating office, retail and industrial buildings for returning employees," says Sarah Wirtz, national environmental practice leader, Risk Placement Services.
Depending on the type of office space, “it's more about being ready for the repopulation in terms of social distancing and making sure that those kinds of controls are in place," Susavidge says.
In certain instances, carriers are offering disinfection coverage. “Coverage includes going in and remediating or disinfecting an area that was exposed to a virus—COVID-19 coverage is usually sublimited with the maximum coverage usually set at $1 million," Slivka says. “In those cases, they are providing affirmative coverage for the cost of disinfecting."
Demand for pollution legal liability coverage continues to grow, too. “You have several robust coverages being offered for risk classes such as health care, hospitality and education in schools, colleges, and universities," Slivka says.
In general, coverage for mold and legionella for the hospital, hospitality, residential and education sectors is becoming limited and subject to higher premiums and more restrictive terms.
“We are still finding that mold, legionella and certain forms of indoor poor air quality coverages are still available in the marketplace," Wirtz says. “However, we may see an increase in mold and legionella claims in vacant buildings due to mandatory closures amid the pandemic."
Perfluoroalkyl and polyfluoroalkyl substances (PFAS) continue to be on the radar for insurers as well as regulators. “I'd expect a steady uptick in claims associated with communicable diseases and PFAS along with some more traditional contaminants like hydrocarbons and heavy metals," Slivka says.
In an ever-changing world where 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 and natural disasters—increased exposures and increased liabilities are setting the market up for a complete evolution.
“We're certainly not done innovating in this space," Susavidge says. “We're always thinking about what's the next coverage enhancement."
Echoing that sentiment, Frank Viola, commercial environmental program manager, New Empire Group Ltd says, “I feel that environmental insurance is an emerging market where five or 10 years ago, it was cyber that was unknown. With the technology today better able to detect smaller pollution incidents, along with stricter regulatory guidelines, I think environmental is going to be the next emerging market."
Olivia Overman is IA content editor.