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Insurance gap widens for environmental losses

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Chris Jones

Chris Jones

New IUA report reveals inadequate cover for typical claim scenarios

Insurance cover for environmental losses is often incomplete or even non-existent without a dedicated environmental policy in place. That is the conclusion of a new research paper from the International Underwriting Association examining potential environmental claims scenarios.

The report highlights the gaps in cover that exist when relying on standard public liability and property policies, or even public liability policies with regulatory clean up and contamination costs extensions.

It highlights a range of potential loss scenarios that could affect different business sectors and result in incidents that are both costly and time consuming to handle.

“What is most striking about the scenarios is that it is easy to imagine a very wide range of businesses being involved in an environmental incident, ” commented Chris Jones, IUA Director of Market Services. “Environmental liability is clearly not only the preserve of heavy industry.”

The research paper, Environmental Loss Scenarios, was prepared by the IUA’s Non-Marine Environmental Committee which is made up of underwriters from across the association’s 40 member companies.

Among the scenarios it covers are dust problems on a construction site, failure of a hotel’s oil tank, a spill of pesticide during transportation and pollution of a car park from poorly maintained drains. All the scenarios are based on real life examples.

The key message of the report is that the gap between the range of environmental liabilities to which organisations are now exposed and the liability cover provided by traditional insurance policies has become uncomfortably wide and will get wider.

“It is important to remember that environmental liabilities are often difficult to manage, ” added Mr Jones. They can take a long time to resolve and involve much technical input which, without an insurer’s help, may prove a considerable burden.

“The importance of having adequate environmental insurance in place has significantly heightened with the introduction of the EU Environmental Liability Directive which is based on the ‘polluter pays’ principle. This places strong emphasis on risk assessment, management and prevention by operators.

“Many EU member states have also required operators to put in place financial security to meet potential liabilities under the directive. So far the UK has not imposed such a measure but may yet choose to do so.”

Copies of Environmental Loss Scenarios, which is published in association with Berwin Leighton Paisner, are available from chris.jones@iua.co.uk. The publication is also available on the IUA website at www.iua.co.uk/environmental together with an earlier report from August 2010 Environmental Risks: insured or not?

About the IUA

The International Underwriting Association of London (IUA) represents international and wholesale insurance and reinsurance companies operating in or through London. It exists to promote and enhance the business environment for its members.

The IUA’s London Company Market Statistics Report shows that premium income for the company market in 2011 was £17.261bn with a further £5.052bn controlled by London but written elsewhere. These results are based on a comprehensive survey of 57 companies and give an overall intellectual and economic premium total of £22.313bn for the London company market.

Viewers can log here and read the Report:  038_Attachment_IUAEnviroReport

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