ace european group umal environmental liability may 2009 tom hillier senior underwriter – uk &...
TRANSCRIPT
ACE European Group
UMALEnvironmental Liability
May 2009
Tom HillierSenior Underwriter – UK & Ireland
ACE European Group2
Content
Environmental Market Focus Operational Pollution Risk Traditional Insurance Solutions ACE Environmental Solutions Considerations
ACE European Group3
Environmental Market Focus (1)
UK industrial history Legacy of contaminated land Significant unknown pollution conditions
Transactional business – key market driver Property Development M&A / Corporate Investment Commercial Lending Pension / Investment Funds
Typical ‘EIL’ Solutions Long-term policies Cover for legacy liabilities
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Environmental Market Focus (2)
Issues Created High premium costs Complex wordings Difficult placement process
The Result Limited access for the client majority Slow market growth Lack of innovation in products and distribution Environmental insurance not on the broker/client radar
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What’s driving our focus on this?
Public awareness & media – Reputation Financiers Corporate Governance UK Legislation
Part IIA of Environmental Protection Act Water Resources Act
European Legislation Numerous EU Directives – waste, water, hazardous
substances – and the most important: EU Environmental Liability Directive (ELD)
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Am I exposed to environmental risk?
Environmental risk is often associated with: Contaminated land and our industrial past ‘Heavy’ industries like chemicals, metals & waste Large-scale disasters
In reality, few companies have no such risk: If you own or operate or buy and sell property If you redevelop ‘brownfield’ land If you use or produce potentially contaminative materials If you create waste (solid, liquid or gaseous)
…then you have an environmental risk
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Operational Pollution Risk
EU Environmental Liability Directive (ELD) Transposed into English law through new regime -
Environmental Damage (Prevention and Remediation) March 2009 – Wales and Scotland to follow soon
Prospective only – operational risks Reinforces ‘polluter pays principle’ Damage to land and water Damage to natural habitats & protected species
(Biodiversity) Main implications
Strict Liability for ‘regulated’ industries Imminent threat & preventative measures Reporting requirement for operators Reporting opportunity for ‘interest groups’ Complementary & Compensatory Remediation
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What if I’m not a ‘regulated’ business?
Focus is on significant environmental damage Only ‘regulated trades will be strictly liable, but
these regulations do not introduce environmental liability – it already exists!
Existing environmental legislation: is wide-reaching and well established; covers impacts to land, water, air and natural resources
already; is more stringent in many areas than the new regs; includes both historical and operational pollution
impacts; can hold any type of business liable can already impose significant clean-up costs
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So what are the consequences?
Civil/tort liabilities Claims for damages from third parties Bodily injury & property damage Nuisance
….can result in compensation payments & legal costs
Regulatory action Government bodies have enforcement powers Human health & Local Authorities Land, air and water - Environment Agency
….can lead to significant clean-up costs and associated expenses
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Am I not already insured against pollution?
ABI Pollution exclusion early 1990s Property Insurance
No cover for historical pollution Land is not usually ‘insured property’ No contaminated soils in debris removal Possible ‘buy back’ of land cover:
Still no cover if gradual Still requires physical loss – no DISCOVERY
Liability Insurance No cover for historical pollution No cover for gradual pollution No cover for damage to own property
Expressly excluded under standard liability forms. Vast majority of pollution incidents will result in clean-
up of the company’s own site No cover for Environmental Liability Directive No cover for clean-up costs imposed by regulators
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Traditional Insurance Solutions
Bartoline vs. RSA & Heaths Background:
Manufacture/packaging of solvents and adhesives
Significant fire at UK site Fire-fighting foam washed solvents and
adhesives into adjacent watercourse EA responded undertaking emergency
remediation works on the river Invoice issued to Bartoline, plus notice served
for onsite works – total cost c. £700k.
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Traditional Insurance Solutions
The Outcome: Bartoline claimed under their PL
policy written by RSA and placed by Heaths
RSA disputed claim so were sued for breach of contract
The court ruled in favour of RSA - liability to repay expenses incurred by the Environment Agency and liability to pay damages in tort are “quite different animals.”
Appeal was due to be heard in October 2007, but case settled out of court shortly before.
Precedent set – S&A pollution, but still not insured
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Can these risks be insured currently?
Many insurers have attempted to amend public liability policies to include ‘Bartoline’ cover, but:
Still no cover for clean-up of own premises; Still no cover for gradual pollution; Still fails to meet liabilities arising under the new
Environmental Damage Regulations:
flora and fauna exclusion clean-up coverage falls well short of
Complimentary and Compensatory Remediation requirements
Liability underwriters lack understanding and experience of environmental risks
Uncertainty therefore prevails……
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ACE Environmental Solutions
Specialist Policies – Key Benefits Pollution conditions – no dispute between what is S&A or
gradual Based on ‘discovery’ of pollution – no physical loss
requirement Site-based policies or contractor coverage Third-party ‘tort’ liabilities for S&A and gradual pollution First-party regulatory clean-up for S&A and gradual pollution Can include first-party business interruption – loss of profit,
loss of rent. Multi-year policies available Policies designed to respond to claims under ELD
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Can these risks be insured currently?
GL or PL coverag
e
ELD scope
Available cover
Accidental pollution Gradual pollution
Legal liabilityFinancial,
material losses /Bodily injuries
Imposed remediation costs
IncludingPrimary
ComplementaryCompensatoryRemediation
Protected species and
habitats
Water / land Natural
resources
Prevention costs Clean up costs on your own
property
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General Client Considerations
Existing Property & Casualty pollution coverage is inadequate
Client does not need to handle chemicals or waste to have exposure
Disclosure and Financial Reporting requirements expanding
Contract conditions are starting to address environmental liabilities
Awareness of Financiers Future regulations are uncertain, but they WILL
be more stringent
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Questions