Millennials are flocking to our cities like bees to a honey pot. Younger generations are craving the hustle and bustle of downtown life and want the convenience of living and working in the urban bubble.
With rapid urbanization – which we are seeing across North America – comes heightened environmental liability exposures. Redeveloping old structures or brownfield land is a challenging enterprise that more and more developers are keen to try their luck at. But it’s important to remember - a building’s industrial history won’t just magic itself away with a lick of paint.
“A trend in recent years has been for millennials to want to live in cities. People want to live and work downtown, which has spurred on mass urbanization,” said Matt O’Malley, head of North America Environmental at XL Catlin. “Most of the spaces available for development have some sort of environmental liability exposure, whether it’s an old factory being repurposed into lofts or a historic city center building being turned into office space.
“Developers who take on these projects without a deep experience of redeveloping those types of properties can sometimes run into trouble, either from a due diligence perspective because they haven’t necessarily asked all the right questions, or they simply come up against a surprise exposure because they didn’t completely understand what to expect.”
Furthermore, in line with North American urbanization, many developers who’ve previously focused their efforts on greenfield land might turn their hand to the urban bubble. However, different challenges crop up during the redevelopment of something built on urban fill or within an urban environment, especially as many have historic impacts from prior chemical or industrial uses.
Another challenge for people to consider is that, once redevelopment is complete, the responsibility for environmental liability often lies in the tenant’s insurance contract. In many cases, the tenant agrees to hold the owner of the building harmless against environmental liabilities. While they may not be insuring the building, they’re taking on environmental risk from a contractual perspective.
Speaking to Insurance Business at RIMS 2018, O’Malley added: “There’s a gap between environmental liability exposures and the number of people actually buying an insurance policy, which means more education is needed in this space. There’s a much broader awareness of environmental exposures, with many large companies introducing sustainability officers, but it’s down to the insurance industry to translate that awareness into a better understanding of the insurance product.
“Environmental liability insurance is a highly manuscripted insurance product. As an insurer, what we want to do is provide as much contract surety to the insured as possible. In order to do that, we can use the help of intermediaries like insurance brokers to gain a holistic environmental assessment of a property, so that we can tailor our product to specific customer needs.”