Australia catching on to environmental insurance

Uptake is growing as boards become more savvy

Australia catching on to environmental insurance


By Nicola Middlemiss

Australia has seen its fair share of environmental changes in recent years and it seems businesses may be waking up to the associated exposures, after one major brokerage acknowledged a growing interest in environmental insurance policies.

“Environmental insurance is becoming more common, a result of both contractual requirements from stakeholders and as an initiative from educated boards and management, aware of the increased obligations and consequences from a pollution incident,” said Cami Mok, client manager for Aon’s environment service group.

Mok also told Insurance Business that, as more environmental policies are taken out across Australia and beyond, an expected increase in claims has followed.

“Many of the claims are initiated by investigation and clean-up requirements from the environmental regulators, and we’ve seen litigation play a significant role, especially around emerging environmental risks, such as PFAS and glyphosate,” said Mok.

“These two contaminants have been mentioned as part of the recent news coverage on the Williamstown and Oakey sites in relation to the Department of Defence PFAS class-actions, and the recent US million-dollar awards for injury from glyphosate, also known as Roundup.”

Closer to home, environmental changes in relation to the Great Barrier Reef have been front of mind recently, after insurance law firm Clyde & Co warned of a potential wave of litigation associated with the poor management and widespread bleaching of the beloved World Heritage site.

“Government and businesses operating in and around the reef can be the target of public interest litigation to curtail particular activities,” said Jacinta Studdert, partner at Clyde & Co.

“Government and business can also be the subject of litigation by businesses impacted by environmental pollution incidents caused by government or industry,” she added.

According to Studdart, there is currently a class action being heard in the Supreme Court of Queensland in which fisheries are seeking compensation for substantial losses, allegedly caused by inappropriate dredging operations of the Gladstone Ports Corporation.

It is alleged that Gladstone failed to properly isolate dredged sediment, which then contaminated surrounding waters and caused “catastrophic losses” to the marine environment as well as consequential losses for a large portion of the Queensland seafood industry participants.

“While the dredging was conducted in state-controlled waters, the damage spread into the Great Barrier Reef World Heritage Area,” said Studdart. “As a result, the activities said to have caused the losses are subject to a complex web of overlapping state, federal and World Heritage obligations, as both Queensland legislation and federal legislation implementing treaty obligations applies.”

Weighing in on how environmental insurance might kick in for a business impacted by the deterioration of the Great Barrier Reef, Mok said a policy would provide a response to damage from pollution – such as remediation costs and compensation for the health and financial impacts suffered by those affected, including the environment. 

“Should a business be impacted by an unexpected pollution incident that damages the Great Barrier Reef, it may not have the financial resources to pay for mitigating that damage, and potentially leaving the consequences and any remedy to the government or the local community,” said Mok.

“An environmental insurance policy can provide some certainty that monies will be available to pay for any damage that occurs.”

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