Tag Archives: environment

Pollution Insurance

Environmental pollution insurance policies are not just for oil industry giants and radioactive depositories anymore.  Further examples are airports, apartment complexes, pig farms and prisons.

According to Dan Persha, founder and director of Environmental Services Group (ESG),  a division of Insurance Concepts “ the market for pollution insurance is fluid and ever-changing”.

The market is fluctuating especially premiums.  In some areas, the market is firming. In other areas, it’s not.   There is not a lot of consistency in pollution insurance right now.   The division is expecting upward growth and increasing volumes.

 Transaction insurance environmental policies that provide coverage where a property is changing hands usually consists of pollution legal liability and cost cap coverage.

Real estate transactions are driving the market.  No one will buy a property unless it has had a Phase One or Phase Two inspection.  As those inspections are heavy, they tend to find problems.  Term lengths for transaction insurance are almost always more one year.  Three, five, seven and 10 year pollution policies are common for a “clean” site.

Although normally premiums run between $3,500 and $7,500 per year, some run less than that.  For a site with a known problem or a buyer or seller that needs pollution legal liability the premiums can start around $50 000.

According to Sheila Hailey, dry cleaners pollution policies “are a hot ticket right now”.  Although she also writes pollution coverage for USTs, Hailey said she gets an average of five calls per week for dry cleaning insurance and writes policies for about 95% of those calls.  The average bill for cleaning a spill from a dry cleaners is $50, 000 while the average clean-up from a gasoline station UST is $10,000.

Not only is Texas one of the largest states in terms of land mass, it also ranks highest in the nation for on-and-off site releases for toxic materials . These include traditionally heavy-polluting industries like oil and gas and chemical refineries.

Generally, environmental policies offered are:

Pollution Legal Liability

Insured are claims from unknown pollution conditions at covered locations specified in the policy.  Generally these policies cover both on-and off-site pollution conditions.  Furthermore they include claims for bodily injury, property damage and cleanup costs.   Pollution legal liability policies are modifiable to fit individual circumstances and many terms and coverages are negotiable.

Property Transfer

Similar to pollution legal liability policies, property transfer policies cover claims generating from a covered location for pre-existing, unknown contamination and known contamination below reportable levels.  In some cases it covers known contamination that may be at levels above regulatory limits but permitted by a governmental body and with a cap in place.  Like pollution legal liability insurance, these policies cover bodily injury, property damage and cleanup costs.  Limits, deductibles and exclusions are also similar to those found in pollution liability policies.

Cleanup Cost Cap or Stop Loss

Very specific policies that protect against cost overruns for remediation of individual projects.  Covered overruns may result from the discovery of additional amounts or newly discovered contaminants, or from charges in regulating requirements at a site.

Coverage is limited to cleanup costs, and claims for bodily injury;  property damage or other liability are not covered.  Also, commonly excluded are the costs of legal defense and governmental negotiations.  Other exclusions may include radioactive matter, asbestos, contractual liability, unknown conditions not disclosed to the insurance companies, and regulatory fines and penalties.

Other policies that may be obtained are:

  • Brownfields Restoration and Development
  • Secured Creditor
  • Professional and Contractor Environmental Liability
  • Transporter Insurance
  • Storage Tank Pollution Liability
  • Closure and Post Closure
  • Finite Risk

The cost for a pollution liability insurance policy will differ significantly from one business to the next.  A business that uses a lot of hazardous chemicals will have higher premiums than one that uses only a few.  Some factors that influence costs include:

The type of business being insured
The type of chemicals and hazardous materials used
The disposal method of hazardous waste
The proximity of the business to residential neighbourhoods


Green Products Insurance

Many insurers look for innovative ways to set them apart from their competitors in order to gain more market share. They establish and promote cutting-edge insurance products relevant to possible climate change which will be of benefit to their clients and the environment during this current universal green movement.

Sustainable/Green Products Sustainable products are those products that provide environmental, social and economic benefits while protecting public health and the environment over their whole life cycle, from the derivation of raw materials used to produce the product until their final disposal. Similarly, sustainable and green insurance products are those that cover the design, production and use of these sustainable products, or the accountability associated with their production and use. They also indemnify against the environmental consequence of potential climate change decisions (or lack thereof). Policies should be put in place where certain aspects promote environmental responsibility. The following green insurance products are presently available in the market: –

Personal Lines Green Property Rebuilding In general, after a covered loss, this type of coverage pays for the use of: Environmentally friendly or more energy-efficient materials when making repairs More energy efficient equipment or appliances For these policyholders who are already green, discounts are sometimes offered on their insurance premiums.

Property Renewable Energy Reimbursement This type of coverage protects a homeowner who uses an alternative-energy system in the case of a power outage. It may provide restitution for: Loss of income generated from selling surplus energy to the local energy company Extra costs to purchase replacement energy Utility or governmental fees for inspections, re-connections or permits when the homeowner’s alternative energy system is brought back online.

Property Loss Mitigation Device Discount Premium credits are offered to homeowners who install mitigation devices or choose storm-resistant construction techniques in catastrophe-prone areas. An example is window shutters to protect homes during severe storms.

Pay-As-You-Drive/Low Mileage Discount Pay-as-you-drive automobile insurance products inherently give incentives to drive less which leads to less pollution that may be contributing to global warming. These programs provide a customer with personalised automobile insurance rates (and hence savings) based on how well and how much they drive. A commercial auto policy premium is based on the amount of vehicle use. A business pays a premium based on a variable totally in the control of the business – the amount of miles driven by the company fleet. The discount comes from lower premiums when premium dollars are tied to travel efficiency.

Commercial Lines Upgrade to Green Commercial Fleets This type of product offers an option to upgrade the company’s fleet to hybrid vehicles for new vehicle replacement as part of an endorsement to the policy. One insurer, Infinity Insurance, took its own advice in creating a green fleet and reported to greenfleet.com. “Since 2006, fleet mpg has increased from 16 to more than 23 (Greenhouse Gas is) reduced from 5, 223 metric tons to 2, 223 due to lower fuel use and better fuel mileage. Fuel consumption has dropped by 115, 033 gallons, saving $225, 000”.

Insurance for Renewable Energy Projects These products provide coverage for companies in the renewable industry (e. g. solar, wind, hydraulic) to help them in managing risk, defending against lawsuits and protecting assets. These insurance products and services are designed to cover all stages of a project from design to distribution.

Insurance for Renewable Energy Property, Equipment and Loss of Use In order to keep with the rapid technological change of the renewable energy field, this type of policy provides replacement cost coverage for equipment with more efficient equivalents. Equipment currently in operation, under construction or newly purchased can be added to the policy. Green roofs are examples of what would be covered.

Insurance for Green Building As part of this coverage, insurers offer help to customers to build sustainably by evaluating designs and specifications for new structures and suggesting ways to ensure high-quality construction and exceptional loss prevention. Similar to the Personal Lines green property policy, those products also cover green materials and construction following a covered loss. Green Building techniques reduce waste, energy and water usage while preserving the environment. Insurance companies recognise the benefits of building green and now encourage the practice through green upgrade options and policy discounts.

Energy Savings Insurance Energy savings insurance policies can provide a backstop for energy savings guarantees given by energy service companies. An insurer pays any shortfall in energy savings below a pre-agreed baseline over the term of the policy, typically in the 5-10 year range.

Insurance of Carbon Capture and Storage/Emission Reduction Projects Insurance products and services are offered to organisations involved in the capture and storage of large volumes of carbon dioxide and other greenhouse gases. These emission reduction projects typically occur at large point-sources of these gases, such as power plants before they can have a harmful effect on the environment.

Green Building Coverage Against Adverse Publicity This reputation coverage provides protection when a green building experiences adverse publicity. Funds are made available to employ crisis management specialists to manage adverse publicity; guide and counsel key company personnel; and provide other services to assist in restoring a company’s reputation.

Perishable Food Reduction Products These products encourage the use of devices that can be used to reduce the amount of produce lost and improve the overall quality of produce during the distribution process from the grower to the retailer. Technology devices continuously monitor the temperature and conditions of produce as it travels, estimating the remaining shelf life. This information is used to route products to maximise quality, saleability and reduce perishable waste.

Global Weather Insurance This product is used to bridge the gaps left by traditional insurance coverage within general property damage policies. Insureds are covered against unpredictable weather conditions and climate change. This may be beneficial for event promoters who want to hedge against a deferred weather variable such as rain/wind exceeding a defined threshold during the hours of coverage.

Political Risk Insurance for Carbon Trading Interested parties such as project sponsors, investors and lenders are given financial protection from risks arising from governmental interference, embargo, license cancellation, war and political violence which could interrupt the production, certification and delivery of carbon credits.

Speciality Lines Given the media attention to global warming and the potential for new lawsuits or governmental actions against entities that may be potentially contributing to climate change, additional speciality insurance products such as the following may be needed in the normal course of business:

Insurance for Pollution/Environmental Liability This coverage has implications for a broad range of risks and industries. Examples include commercial general liability pollution legal liability, and environmental responsibilities stemming from legislation and court rulings. Losses can arise from different hazards or activities and can have impacts on large corporations to small subcontractors in construction.

Directors and Officers Insurance It has been noted that there is increasing litigation occurring against companies that are believed to be contributing to climate change. Even a company’s inaction to disclose, assess or implement adaptation strategies could leave the door open to future litigation. Some insurers now offer directors and officers policies with optional global warming litigation protection. Other speciality lines encouraging more green behaviour include:

Architects and Engineering Professional Liability Insurance Discount for Building Commissioning Some insurers believe that there is a correlation between sustainable practices such as energy-efficiency and a low-risk profile. Building commissioning is the process of verifying that all of the subsystems (electrical, plumbing, HVAC,…) are working effectively, efficiently and as designed. Not only is the good for the environment, it also reduces the likelihood of professional liability claims. As such, architects and engineering firms implementing building commissioning as part of the construction process are given insurance premium credits. Professional Liability Insurance for Raters and Home Energy Survey Professionals Suitable insurance coverage is often lacking for many specialist professionals who provide energy-efficiency services. Certain qualified raters and home energy survey professionals are offered professional liability, general liability, and property coverage in order to protect themselves from accidents and potential lawsuits that may occur as a result of business operation.