Environmental insurance – which includes everything from environmental liability to contractor’s liability and historical pollution coverage – is designed to counter pollution exclusions in P&C policies. If these gaps are not filled, environmental exposures are likely to topple a business through costly legal fees and cleanup responsibilities in the event of an unexpected environmental incident. While sometimes neglected, these policies remain vital to many operations, shielding many multi-million-dollar projects from possibly catastrophic costs.
Like most segments of the market, environmental insurance hasn’t been immune to the fallout from the COVID-19 pandemic.
“Prior to going into the pandemic, we were seeing claims related to indoor air quality begin to increase, particularly concerning mould and Legionella,” Rani Christie, head of distribution for Allianz Global Corporate & Specialty, told IBC in February. “[After] March 2020, you had these facilities that were boarded up for some period of time ... and these large buildings with complex plumbing haven’t had the maintenance that you would under normal operations. That could potentially create an environment for humid and water-rich environments to sit and become stagnant, which will allow that bacteria to grow and then potentially get into the system.”
Yet despite the obstacles thrown up by COVID-19, Andrew de Ruiter, vice-president for Western Canada and national environmental liability segment leader at Totten Insurance Group, says the environmental insurance market has been fairly stable.
“Market conditions in this space have been in a slight state of flux over the past year,” he says. “We’ve been seeing changes in appetite and rate, depending on individual experience. In 2021, we’re seeing similar changes in appetite, and we could expect to see some change to rates as a result.”
Christine Nauth, an assistant vice-president at SUM Insurance who has more than a decade of experience in the environmental sector, agrees for the most part.
“The market conditions really haven’t changed overall for [environmental impairment liability],” she says. “It’s pretty stable and steady. We didn’t have too many clients where we needed to cancel or decline or anything like that. Our books seem to renew with no issues. There are certain class-specific sectors that tightened up a little bit over the past year, but other than that, [it’s] pretty stable.”
Looking ahead to the remainder of 2021, Nauth says she expects “those same site-specific harder-to-place markets and contracting exposures will continue to tighten.”
Another thing that should be on the radar of brokers working in the environmental space, she says, are changes to Canadian Construction Documents Committee (CCDC) contracts.
“One of the requirements is now for all contractors to carry [contractor’s pollution liability] with a $5 million limit,” Nauth says. “We do see a lot more contracting business in the next year.”
The way in which both Totten Group and SUM Insurance responded to these market conditions helped them rise above the competition in this year’s 5-Star Awards for environmental insurance.
“I believe what helped us stand out is the service and expertise that our underwriting team provides,” de Ruiter says. “We’re fortunate at Totten to have a really great team that can provide a level of experience and expertise that our brokers look for in an environmental insurance company. With our team’s expertise, we’ve worked to create environmental insurance products that differentiate our product offerings from the competition. Our team is also driven and focused on providing exceptional service to our supporting broker partners.”
Nauth likewise puts SUM’s success down to its expertise in this segment. “We have quite extensive personnel on the team,” she says. “We have Serge [Melanson] in the Montreal office, who was the original founder of SUM. I myself have only been in environmental. I just think it’s [our] expertise and the relationship with our brokers.”
De Ruiter also emphasizes Totten Group’s strong relationships with brokers.
“We really want to thank our broker partners for nominating us for this award,” he says. “We are continuing to enhance our environmental product offerings and find ways to better support our brokers. Thank you to our brokers, and we appreciate your continued support.”
Of the hundreds of brokers IBC surveyed about their environmental insurance providers, an overwhelming majority (96%) said service to brokers is of the utmost importance when selecting an insurer in this space. Many respondents praised their first-choice environmental insurers for “great service,” while others lauded insurers and MGAs for their quick turnaround times, especially when processing quotes. “They have always come through for us,” one broker said of their MGA.
An almost equally high number of brokers (93%) pointed to underwriting expertise as a critical factor when choosing an environmental insurer. Brokers appreciate insurers and MGAs that have reputable underwriting experience in this space and the knowledge and capacity to meet their clients’ needs. One broker praised their MGA’s underwriter for having “a great deal of market experience” and being “very responsive towards brokers.” An ability to deliver common-sense solutions is also paramount – one broker commended their top-choice MGA for having “the most flexible underwriting capabilities.”
Also important to brokers was an environmental policy’s value for money – 90% of brokers said getting a competitive product at a good price is an important factor when choosing an environmental insurer, and competitive rates were mentioned several times when brokers were asked to single out their first-choice insurer or MGA in
Slightly less important to brokers were insurers’ and MGAs’ claims processing speed, ability to customize policies and the access they provide to risk mitigation partners, none of which were mentioned by brokers as reasons why they choose to work with their top insurance partners.
Lowest on brokers’ priority list was an insurer or MGA’s online platform – in fact, 17% of brokers said this aspect was not important at all when deciding which environmental insurer to place a policy with.
‘Market leading’ is a phrase many insurance companies like to use when describing their products. Now 14 companies can claim that title on the back of hard market research from the people who matter most: insurance brokers.
To select the best environmental insurers for 2021, IBC surveyed hundreds of brokers to gain a keen understanding of what insurance professionals think of current market offerings. Brokers were first quizzed on what features they thought were most important in an environmental insurance policy and then asked how the insurers they dealt with rated on those attributes.
Insurers were measured on the strength of their relationships with brokers, ability to handle claims, underwriting expertise and, most importantly, the strength of the individual products they provide.