Environmental risks are growing every day, and their scope is becoming broader. This is evident as businesses prepare for future energy solutions, adapt to climate risk, and strive to make their operations sustainable.
In this article, members of AXA XL’s Global Chief Underwriting Office Environmental Risk Team - Philip Russell, Regional Product Leader for Environmental Risk Consulting, Gregg Shields, Head of Risk Consulting - Environmental, Americas and Kathrin Sykes, Global Underwriting Manager, Environmental, share their perspectives on how businesses should think about managing evolving environmental risks.
What are the latest trends you are seeing in the environmental risks space?
Philip Russell: The boundaries of what we see as the classical areas of environment are expanding all the time. Businesses face big challenges in what they are being held accountable for, and the scope of environmental risks is broader.
We see the importance of managing environmental risk in the supply chain, and value chain, and all the ramifications in understanding and driving change in that. The value chain is the new frontier for businesses when it comes to environmental impact and business continuity risks. Secondly, we need to increasingly think about environmental damage in the context of impacts on nature, water, and climate, and vice versa in terms of the impact of those factors on businesses. All of this underscores the increasing need for due diligence, the tools to deal with the scale of the challenge, and the services provided post-binding.
Gregg Shields: The presence of per- and polyfluoroalkyl substances (PFAS), microplastics, and other emerging chemicals of concern in the environment is an on-going focus not only of scientific study but also regulatory action.
Regulators are looking closely at drinking water standards, air and wastewater emission limits, treatment and disposal options, and site cleanup standards. Also, there is increased attention to the interrelated exposures associated with climate risk adaptability/risk assessment, sustainability data management and reporting, and biodiversity and ecosystem resilience. These are all intertwined with extreme events — for example, flooding, wind, and wildfire — and the ongoing potential liabilities associated with natural resource damage in North America and the Environmental Liability Directive in the European Union.
Kathrin Sykes: Environmental liability litigation is increasing in the United States, United Kingdom, Australia, and elsewhere. These countries are seeing a rise in cases filed, which underscores the growing exposure of companies. Biodiversity loss is becoming a critical environmental risk with far-reaching implications for companies. As biodiversity becomes more of a material factor, insurance can play an important role in supporting biodiversity resilience.
Learn why AXA views the biodiversity challenge as a natural extension of its climate risk mitigation and sustainability efforts
The World Economic Forum’s Global Risks Report identifies biodiversity loss and ecosystem collapse as the second greatest global threat of the next decade, after extreme weather events.
Why should all companies care about environmental risks?
Kathrin Sykes: Environmental risks are increasing globally, as are environmental legislation and their enforcements. According to WEF Global Risk Report 2025, the most severe long-term risks are environmental related including biodiversity loss, natural resource shortages, pollution and (legacy) contamination. Environmental liabilities for multinational operating companies are expanding in scope, complexity, and legal exposure, driven by evolving regulations, stakeholder expectations, and litigation trends.
Global Risks 2035: The point of no return - Global Risks Report 2025 | World Economic Forum
Gregg Shields: While most companies want to be good stewards of the environment and maintain safe and sustainable operations, they are also aware of the reputational risk that can be associated with large environmental claims affecting neighbors and the community. That said, the real attention-getter for most CFOs and risk managers is the potential shock loss to their bottom lines from large, unexpected environmental problems – whether an unexpected incident or a legacy exposure. Without strong environmental management programs and appropriate environmental insurance, pollution liability claims can impact a company’s profitability in any given year – and even threaten their long-term viability.
What type of environmental risks can impact companies?
Gregg Shields: Any exposure that involves hazardous materials, chemicals, or petroleum products can impact the health and safety of site workers and third parties and can result in on-site and off-site environmental impacts. Even nonhazardous materials such as milk or vegetable oil can have environmental impacts if released into a sensitive environment like a protected stream or wetland. Operational problems with pollution control equipment used for air emissions or wastewater treatment can result in pollution conditions on- or off-site. Solid and hazardous waste generation and disposal can also result in long-term pollution liabilities if not property managed.
Environmental risks can involve unexpected issues involving spills, fires or explosions that result in chemical releases to the environment or they can be legacy issues related to previously unknown and newly discovered historic issues such as groundwater contamination, underground storage tanks, or contaminated urban fill. Companies also have exposures related to third-party legal liability claims from hazardous material releases that may have caused alleged bodily injury or property damage to nearby residents and businesses. There is also regulatory risk associated with fines/penalties associated with environmental contamination under a variety of agency programs such as the Environmental Liability Directive and Natural Resource Damages.
Environmental standards can also be expanded to regulate new chemicals, environmental pathways, or simply involve more stringent emission or cleanup standards, thereby creating environmental liabilities where they once did not exist. This can also result in a “re-opener” risk for site owners that were compliant with all historic regulatory agency requirements. This can even include sites that had previously obtained no further action determinations under voluntary or mandatory site cleanup programs.
We also need to consider environmental risk in the context of regional climate shifts and the potential for this to cause pollution. A clear example might be flooding causing off site pollution, but it can go wider to temperature changes, landslides, even wildfires.
Without strong environmental management programs and appropriate environmental insurance, pollution liability claims can impact a company’s profitability in any given year – and even threaten their long-term viability.
How do water, soil and air risks affect the operations of companies?
Gregg Shields: Managing environmental risks goes beyond being a good steward of the environment, it can have critical impacts on a company’s profitability. Companies create budgets for environmental pollution control equipment, waste disposal, and staffing for regulatory reporting and compliance, but when an environmental event occurs, or unknown contamination is discovered, it puts stress on the human and financial resources.
Companies must control wastewater discharges, air emissions and waste disposal so that on-site and off-site impacts are minimized. When groundwater and soil become contaminated, time and money are spent to determine impacts both on- and off-site. This also creates potential legal liability associated with alleged bodily injury and property damage claims.
Over the last 10 to 15 years, we have also learned a lot about environmental pathways such as soil vapor intrusion into structures or sediment contamination/transport. Regulatory agencies are constantly assessing emerging chemical risks in terms of toxicology and impacts to human health and the environment. We have also become more knowledgeable about the fate, transport, and behavior of specific chemicals in the environment. This creates new company obligations and the need for additional engineering controls, site investigation, and cleanup.
Philip Russell: These types of issues can have a significant impact both corporately and locally. Businesses often talk about their license to operate and their freedom to operate. There are many examples of where both have been damaged. The reputational aspects can be harder to monetize, but there are many examples of where companies have had to close sites due to impacts on the local environment and surrounding communities. By helping companies understand their risks, we can work with them to help manage and mitigate them to prevent the environmental and business damage.
Why is it important to engage risk consulting and engineering services?
Gregg Shields: AXA XL’s Risk Consulting team is comprised of over 400 technical staff with broad expertise in a variety of industries with diverse risks. We have backgrounds working for industry, regulatory agencies, consulting firms and other insurance carriers. Because we interact with so many different prospective and existing customers, we can identify best practice and provide recommendations for improvement or simply better ways to minimize risk. Our Risk Consulting team has a solid understanding of the exposures in any given industry or service sector. We can bring additional resources and tools to bear that help our underwriters and customers better understand both existing and emerging risks.
What are the latest risk prevention tools available to clients?
Gregg Shields: AXA XL maintains formal relationships with technology companies via our Digital Commercial Platform that offers a variety of risk management software and hardware. These companies focus on technology solutions to prevent or reduce exposures related to fleet operations, worker safety, property, construction, environmental, and emergency response risks. We are happy to introduce customers to these firms that offer risk management solutions within their core areas of expertise.
Our technology partners can provide support in areas such as telematics, worker wearables, workplace safety monitoring, construction management, property/indoor environment monitoring, site restoration, and sustainability. We also work with variety of third-party consulting firms that can offer environmental, health and safety program development and compliance support. Our customers are not obligated to work with any of these firms – we provide researched options, and our customers engage based on their needs and budget. For example, in 2024 we brought on board Velocity EHS, who can provide customers with integrated digital platforms to manage data related to safety, ergonomics, chemicals, sustainability, contractors, and other operational risks.
Philip Russell: Digital technology and tools are becoming very transformative in environmental risk management. Again, the scale of the challenge means that digital tools are needed. In addition, a great deal of data sets that inform risk are becoming available publicly, so we need to tap into, collate and process that as part of the underwriting we do.
We have digital tools assessing aspects such as environmental sensitivity, water risks and/or for changing natural perils related to climate. These tools are used to evaluate companies with large portfolios of owned sites, or supply chain sites and assess these locations against a series of hazards. All the tools allow us to rank a company portfolio against potential risks and liabilities, either at the present day, or in the future via climate modelling. This is extremely beneficial because it helps us and the company to prioritize those assets that need closer scrutiny.
What advice would you give to companies that view environmental insurance as optional?
Gregg Shields: In our space, environmental insurance coverage is typically considered a discretionary purchase, but when environmental incidents happen, they can really be a shock to a company’s bottom line and threaten profitability. Having an insurance relationship both provides support for covered losses and engagement as to legal issues, site investigation, and cleanup assessment. The faster we can respond to help our customers resolve claims the better – it is a win-win scenario.
Kathrin Sykes: Environmental insurance is no longer a luxury. It is a strategic necessity and should form part of a company’s environmental management practices. As global regulations tighten and loss to biodiversity increases, companies must protect themselves against potential liabilities that could jeopardize their operations, finances, and reputation. For multinational operating companies, having environmental coverage is essential in navigating the complex global landscape.
Learn more about AXA XL’s Environmental Insurance capabilities
