Environmental insurance is becoming increasingly important in a world that is becoming smaller and more inter-connected, yet more complex at the same time, warns Chubb.
For multinational corporations, environmental risk today spans a number of factors, from wide-ranging regulation to the speed of information spread via social media, finds a new report from Chubb produced in collaboration with law firm Clyde & Co.
Environmental risk is increasingly a top priority for companies today: man-made environmental disasters climbed to seventh place out of the top 10 risks in the latest World Economic Forum Global Risks Report.
“That’s much higher than it was before. It’s really moving up the ladder in terms of importance to risk managers,” Jane Anderson, senior underwriter casualty at Chubb, told Insurance Business.
Historically, environmental insurance has not always been a priority purchase. But in today’s soft market, when premiums on casualty programs are generally reducing, firms may have a bit more premium spend and can look at the other products and risk exposures, according to Anderson.
“That’s where we have seen a lot of growth in terms of environmental insurance during recent times,” she said.
For multinational companies, navigating a complex set of differing regulations across the markets can prove extremely challenging. A decade ago, a typical multinational would have been primarily focused on complying with regulations in its home country, but today they are under increased pressure to prove compliance with rules and regulations across the entire base of operations.
“One of the common challenges with environmental insurance is getting the risk manager to understand the full extent of their environmental exposures,” Anderson commented.
In a more globally connected world, the environmental risk landscape has expanded beyond the tangible threats of clean-up operations and regulatory penalties – it has now moved online.
“One of the biggest risks at the moment for risk managers is the reputational damage. It’s not just the physical loss and clean-up costs anymore following an environmental event, it is things like the media getting hold of an incident, and with social media these days, news spreads extremely quickly,” Anderson said.
Failure by organisations to act in an environmentally-friendly way can have drastic consequences, particularly in the “unforgiving” world of social media, the report warns.
The heightened awareness on environmental issues shows little sign of slowing down: the report warns that there is “not a country in the world, with the possible exception of the US, that is winding back on environmental regulations.”