Top brokers discussed the most pressing environmental risks clients face and the issues to consider when choosing a policy, during an online forum hosted by Insurance Business earlier this month.
The expert panel included Judith Golova, head of environmental insurance at Marsh; Max West, senior vice president at Aon; Emilie Walsh, partner, environmental liability, McGill and Partners; Stephen Sykes, director at Ashfield Risk Transfer Solutions; James Alexander, environmental practice leader for Lockton Companies; Duncan Spencer, director of EDIA Limited; and Richard Lawrence, technical and complex loss director environmental, QuestGates.
“Apart from COVID, of course, the risks on people’s minds are climate change and biodiversity damage,” Golova said.
Sykes added that environmental laws designed to combat climate change “evolve all the time,” creating an added challenge to underwriters.
“Sometimes wordings that were suitable a few years back won’t cover emerging and new liabilities today – so that’s significant,” Sykes explained.
Lawrence agreed, noting it is crucial that clients understand what is and what is not covered under their policy. “Knowing what is and isn’t covered is so important when you’re managing the expectations of stakeholders, particularly regulators,” he said.
Lawrence added that, in the past, a lack of understanding in these areas has been a major issue – making education critical.
“What we’ve tried to do and what insurers certainly have taken onboard is the willingness to have training delivered by ourselves but also other professionals in the market, such as environmental lawyers and consultants – that’s certainly where improvements are being made, the level of understanding and knowledge of environmental claims,” Lawrence said.
When asked about the biggest issues to consider when selecting an environmental policy, Walsh said it was dependent on the complexity of the risks involved.
“The key factors we’re looking at are coverage and value for money,” she explained. “Us brokers are actually quite simple creatures when it comes to assessing our quotes.”
Alexander asks how much environmental coverage their clients’ other insurance policies contain, noting that general liability and property coverage can afford sudden and accidental coverage, of sorts. He said when selecting insurers for his clients, a baseline of what coverage they have must be established from day one.
“Identify the gaps, whether they’re legal, technical, or contractual,” he said. “Then match it to the risk appetite of the buyers, because one person’s policy limit is another person’s retention.”
With environmental protection laws and regulations ever-evolving, Spencer and West agreed there is an uptick in the market.
“I would say this last quarter is the busiest we’ve ever been,” Spencer said.
“What’s driving these increases?” West asked. “COVID-19 has a part to play in it, but also there were a lot of losses caused by the wildfires in California. These were unexpected, unintended, and really not budgeted for, and so you’ve got to make up the losses somewhere, and they’re trying to put the squeeze on the environmental insurance market there.”
Alexander added that, given the Paris Climate Accord targets, a carbon zero advisory within the supply chain is critical.
“Carbon zero has to be the way to go,” he said. “We’re in the transition now, and the quicker we transition to a net-zero future, as a community of underwriters and brokers, is the only way to go.”