Environmental liability insurance - Air Pollution - smoke

Environmental liability insurance market takes off as regulators crack down on pollution

As standard property or general liability policies don’t cover enough, pollution coverage is increasingly common.

Environmental liability insurance is rapidly growing in popularity as exposures have grown beyond the coverage from general liability and standard property policies.

Claims relating to pollution and the environment are frequently complex as well as expensive.

The complexity and cost relating to issues relating to pollution have sent underwriters to step away from risks relating to pollution. This has left a gap open for environmental liability insurance products to fill. The market in many countries is expanding, including that of Canada, where the increase has been very rapid.

The pollution coverage has moved from its former position as a niche market that was geared nearly exclusively to the oil and gas industry as well as chemical manufacturers. Now, it has expanded into a far more mainstream position. The growth was greatly driven by amped up environmental regulation which has increased liability exposures.

As companies face more exposures, environmental liability insurance has become more important.

“People are definitely buying more pollution insurance coverage, which is largely due to heightened regulation combined with stricter financing requirements from banks and investors,” said environmental underwriter Miles Foxworth from Beazley Canada in an Insurance Business report.

“If a company is refinancing or trying to get a loan for a property, a bank won’t want to take on any pollution exposure and so will require the company to have pollution coverage in place before offering any funding,” said Foxworth. At the same time, individuals and companies alike shopping for property are seeking pollution liability coverage, particularly if they plan to build on that property, he added.

Similarly, large property developers frequently seek out environmental insurance coverage before they break ground on a project. Contractors will also sometimes buy a pollution insurance policy as some are not permitted to begin on site until they have arranged for coverage.

Still, even as environmental liability insurance grows in popularity, Foxworthy underscored Environmental liability insurance - Air Pollution - smokethat education regarding the exposures and the coverage is still lacking on the whole. He referred to education as the “consistent number one challenge” this type of product faces when it comes to widespread adoption.

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