As climate change debate rages, environmental insurance goes strong

“The United States is one of the more developed markets for pollution insurance.”

As climate change debate rages, environmental insurance goes strong


By Sam Boyer

The market for environmental insurance has remained strong, says one insurer, even after the new Government environment head questioned the link between pollution and damage to the environment.

In March, Environmental Protection Agency (EPA) boss Scott Pruitt said he did not believe carbon dioxide was a major cause of global warming – a belief that was quickly rebuked by the American Meteorological Society, and is at odds with mainstream scientific community opinion, including that of the UN Intergovernmental Panel on Climate Change, NASA, the National Oceanic and Atmospheric Administration and the EPA itself.

Tom Williams, North American environmental practice leader for Allianz Global Corporate & Specialty, said environmental coverage is as important now as ever – despite Pruitt’s public assertion. The market for pollution insurance hadn’t changed since President Trump-appointed Pruitt took over the regulatory body, he said.

“If you think about your average business, none of them are in it for a four-year run,” he said. “They’re going to want to operate beyond this administration, so they’re going to continue to be good social and environmental stewards.”

In the 2016 World Environmental Performance Index, out of Yale University, the United States ranked as the 26th cleanest country, behind 21 European nations, plus New Zealand, Singapore, Australia, and one spot behind Canada.

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“The United States is one of the more developed markets for pollution insurance, definitely the largest globally right now,” said Williams. “And that’s based on two-fold [reasons]: one, there are more regulations focussed on environmental; and [two], the litigious nature of people who live in the United States.”

So brokers should be considering environmental insurance for all of their clients, Williams said.

“Every business has a pollution exposure,” he explained. “I think they [brokers] need to closely evaluate the need to purchase cover versus their clients self-insuring. We don’t have frequency, we have severity. So, for a small company, they could have to shut the doors on a family-run business of 40 years because you have a large environmental pollution incident. I think everybody needs to closely look at: what are my environmental exposures and look at it along the three prongs of clean up, and your traditional bodily injury and property damage.”

Yet as important as environmental insurance can be, Williams said half the reason insurers miss out on policy sales is not down to being beaten by a competitor, but because many clients simply choose to gamble on their potential pollution risk.

“People know about the product and they know about the market existing, they just choose to self-insure sometimes,” he said. “Honestly, I would tell brokers in my last role, and still to this day, that I felt that I lost to a no-sale as often as I lost to a competitor.”

Related stories:
Cross-state air pollution rule final
The emergence of environmental liability insurance

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