Lets Talk: State of the environmental insurance market
As the saying goes – there is no use crying over spilled milk. For many businesses, dealing with spilled milk is not a likely problem. Instead, the question is – what happens when fuel oil, hydraulic fluid, stored chemicals, or other substances spill? Without the right insurance coverage, such a spill may give businesses a good reason to cry.
Environmental incidents like these can easily result in a five or six-figure clean up price tag. Fortunately, says Matt O’Malley, president of AXA XL’s North America environmental insurance business, that’s why environmental insurance has become more of a staple in businesses’ insurance portfolios. Here he explains why.
Are more businesses buying environmental insurance?
O’Malley: Yes. More businesses have come to realize that their operations can have some environmental impact. When it does, they have also become aware that their commercial general liability or their property insurance offer little coverage to clean up after an environmental incident. Environmental insurance fills this gap, covering loss or damages that result when an unexpected pollution incident happens. An environmental policy can cover a business against claims for bodily injury, property damage, cleanup costs, and business interruption. And because there is a steady demand for environmental coverage, the market continues to be very competitive, but we see ample opportunities for growth.
Where do you see the most growth opportunities for your team?
We continue to see growth in the services sector, environmental consultants and contractors in particular. The construction industry is booming right now. General contractors are requiring all types, all size contractors to have environmental coverage as part of their contracts. To help contractors meet these requirements, we offer Contractors Pollution Liability (CPL). It’s offered on a claims-made or occurrence basis that provides third-party coverage for bodily injury, property damage, defense, cleanup, and related defense costs as a result of sudden/accidental or gradual pollution conditions arising from contracting operations performed by or on behalf of the contractor. Many contractors are new buyers. As their operations have grown over the last few years, so have their environmental insurance requirements. We’re seeing that kind of organic growth in the market.
Are there any other types of businesses buying the coverage?
By now most businesses know that they don’t have to be in the environmental business to have environmental exposures. Our clients represent all size businesses from across industries. Retail. Real Estate. Hospitals. Hospitality. Universities. Restaurants. Transportation companies.
Environmental insurance also provides coverage for financial losses associated with historic contamination or operational issues, such as mold, lead paint, asbestos, Legionella or indoor poor air quality.
There are also policies designed to protect lenders as well as real estate agents, managers and developers when properties they manage are contaminated. In fact, environmental insurance has become a big component in transactional deals whether it’s a sale of a piece of property or real estate portfolio or merger and acquisitions of a whole operation. Environmental insurance is seen as a tool to facilitate transactions because it addresses environmental liabilities that could potentially stop a deal in its tracks.