Plastic Pollution: A New Threat to the Insurance Industry?
Plastic pollution isn’t just an environmental crisis anymore. It’s becoming a financial and legal nightmare for businesses—and their insurers. Microplastics are showing up in food, water, and even human bodies. The risks? They’re piling up. But here’s the big question: is the insurance industry ready for this?
The Growing Problem
Plastics are everywhere. Over 9 billion tons have been produced since the 1950s. Most of it? Not recycled. Instead, it ends up in landfills, oceans, and ecosystems. As it breaks down, it forms microplastics—tiny particles now linked to health and environmental damage.
The costs are staggering. Studies estimate plastic pollution costs society over $100 billion annually. This includes cleanup efforts, ecosystem damage, and medical expenses. And some of these costs? They’re already turning into lawsuits.
The Insurance Angle
So, how does this affect insurance? In a big way. Plastic pollution is creating new liability risks for businesses, especially in industries like food, packaging, and manufacturing. Here’s how:
- Health Claims: If microplastics in food or water are linked to health problems, lawsuits could follow. Businesses might get dragged into court. Insurers? They’d be stuck covering legal fees, settlements, or even medical bills.
- Environmental Damage: Companies responsible for plastic pollution could be forced to pay for cleanup or ecosystem damage. This means big claims under environmental liability policies.
- Greenwashing: Claiming to be “eco-friendly” when you’re not? That’s risky. Misleading consumers could lead to lawsuits. Insurers offering Directors & Officers (D&O) coverage might have to step in.
Can It Be Proven?
Here’s the tricky part: proving one company’s microplastics caused specific harm. It’s tough. Microplastics are everywhere, and health issues often result from long-term exposure. But science is catching up. It’s becoming easier to trace these particles back to their sources. That’s bad news for businesses—and their insurers.
Take the case of Formosa Plastics. The company paid $50 million to settle claims that it polluted Texas waterways with plastic pellets. Or the recent lawsuit against Coca-Cola, PepsiCo, and Procter & Gamble. A California court allowed the case to proceed, alleging these companies created a public nuisance by promoting their products as recyclable while knowing they weren’t.
What About Business Insurance?
Most standard business insurance policies don’t cover gradual environmental damage. That’s where environmental liability insurance comes in. This specialized coverage can help with:
- Cleanup costs
- Legal fees
- Health claims related to pollution
But here’s the catch: it’s not cheap. And many businesses don’t have it. Some general liability policies even have “absolute pollution exclusions,” meaning they won’t cover pollution-related claims at all. Business owners need to check their policies carefully. Adding environmental coverage as an endorsement might be an option, but it comes at an extra cost.
Should the Industry Take Notice?
Absolutely. The insurance industry has seen this before—with asbestos, tobacco, and climate change. What starts as a small trickle of claims can quickly turn into a flood. And the signs are already there. A report by the Minderoo Foundation predicts plastic-related lawsuits could cost businesses over $20 billion in the U.S. alone by 2030.
The Takeaway
Plastic pollution isn’t just an environmental issue anymore. It’s a financial and legal one. For businesses, it’s a wake-up call to review their insurance policies. For insurers, it’s a storm that’s only just beginning. The question isn’t if claims will come—it’s how big they’ll get.