The environmental insurance marketplace is experiencing some interesting activity. More carriers are entering this specialized space to compete for business and the account opportunities appear to be abundant. We interviewed a few of our carrier partners to get their take on the current market―challenges, opportunities, and trends that agents and their insureds should be aware of.

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 From an insurance carrier perceptive, how would you characterize the current environmental insurance marketplace?

 Amanda Duncan, President, PartnerOne Environmental:  The current marketplace is extremely crowded, with excess capacity and very depressed rates.

 Kirk Davenport, Divisional Vice President, Great American Insurance Group:  The current environmental marketplace has been one of change. Some established markets have pulled back on their appetite or even exited while several newer entrants have been aggressive on both pricing and coverage.  In addition, there have been some large mergers in the environmental space resulting in an overall reduction in available capacity. Despite the apparent adverse loss development on some older environmental books and the reduction in capacity there is still downward pressure on rates albeit a bit less than prior years.

 Henry Nealis, Specialty Products – Environmental, Zurich North America:  I would say it’s very busy.  Probably from a combination of a leading insurance company pulling out of the marketplace and also a result of real estate development and redevelopment due to sustained low interest rates.

John Termini, Managing Director - Environmental & Energy Product Line,Markel Corporation:  Most of my peers would probably characterize the environmental insurance marketplace as competitive, soft, unpredictable or crowded, however, I believe the space is opportunistic. We see a significant number of high risk insureds which have been displaced due to recent changes in appetite and underwriting guidelines of other carriers. Through thorough underwriting we view these high risk insureds as an opportunity to provide risk based insurance solutions to our partners and insureds.

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 How important do you think the Carrier is to the overall value of the product offered?

 Rob Owens, EVP Environmental, Westchester:  Environmental insurance is a specialty product; therefore, the selection of a carrier suited to meet the unique challenges facing today’s environmental businesses is vital. Companies, through everyday operational activities, may have any number of exposures. One of the fastest growing sectors of our industry is Premises Pollution Liability. With this coverage, the risks often include the evaluation of large amounts of technical information. As a result, it is critical that the carrier has underwriting staff with a background in Geology, Environmental Science or Environmental Engineering to effectively underwrite this line of business in a way that delivers value to the customer.

Henry Nealis, Specialty Products – Environmental, Zurich North America:  The carrier is very important because if you buy a policy and the company does not pay the claim, what good is the policy?

John Termini, Managing Director - Environmental & Energy Product Line,Markel Corporation:  Due to its ability to make whole on the promise it makes to pay and defend its insureds, the insurance carrier plays one of the most important value propositions in product offerings.  In today’s pricing focused, competitive market only the most prudent insureds ask the question about the insurer’s financial stability, claims expertise and experience in handling complex claim situations. Nothing satisfies an Underwriter more than to hear from an insured or insurance broker about the positive claims experience they had and how it made the entire negativity of the situation go away. Insurance professionals and insureds seeking the best solution with a strong, financially stable carrier that has claims expertise will find the value of the carrier to be much more important to the transaction.

 Kirk Davenport, Divisional Vice President, Great American Insurance Group:  In today’s crowded marketplace, the carrier’s culture is one of the key differentiators. It is very important to remember that the insurance product is not simply just a piece of paper. The bound policy represents the culmination of the client’s experience with the carrier’s underwriting team―it begins with the initial underwriting process, the negotiation of language and binding, mid-term servicing capabilities and ultimately claims handling expertise. Is the carrier responsive to the agent’s timing requirements? Can the carrier’s underwriters deliver a viable product that meets the client’s coverage and language needs? Does the carrier have in-house claims personnel with the experience needed to properly respond to complex environmental claims? The carrier’s culture dictates the answers to these questions much more than the paper itself ever could.

 Amanda Duncan, President, PartnerOne Environmental:  The choice of carrier is very important; insureds are looking to protect their businesses and should partner with insurance carriers that reflect quality, financial strength, and longevity.

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What factors do you believe contribute to value for an insurance provider?

 Henry Nealis, Specialty Products – Environmental, Zurich North America:  I believe carrier experience and longevity in the marketplace, experienced claims attorneys, and experienced underwriters all add value.

 Amanda Duncan, President, PartnerOne Environmental:  In-house claims handling with adjustors that specialize in environmental claims is very valuable to a carrier, as well as to the insured.

 Rob Owens, EVP Environmental, Westchester:  We find that our clients have varying needs, and as a result, we tailor our policies to meet those needs. Invariably, however, we find a common theme which centers on the breadth of product, the experience of our underwriting staff and the financial stability of our company. In the end, as one of the most respected environmental insurance carriers in the industry, we find that offering creative and insightful solutions, ultimately benefits our customers most.  

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What market challenges have you seen in recent months?

John Termini, Managing Director - Environmental & Energy Product Line, Markel Corporation:  Continued capital invested in the environmental insurance space has made it tough on insureds to make the best purchase decision. Insurance decisions are made predominately due to pricing, rather than on coverage, financial stability (insurance carrier) or ability to handle claims. We have seen an unprecedented number of environmental program opportunities in the past few months. Submissions are not necessarily from industry specialists and run the gamut from small to large brokers throughout the United States. Although program opportunities look attractive on face value many of them lack the historical data necessary to support profitable and sustainable growth. It appears many of these opportunities are as attributed to aggregators versus specialty underwriters. These program opportunities will eventually put pressure on existing carriers further driving rate and profitability down in the environmental segment.  

Amanda Duncan, President, PartnerOne Environmental:  As mentioned previously, the market is too crowded and underwriting integrity is becoming compromised in order to win an account.

 Kirk Davenport, Divisional Vice President, Great American Insurance Group:  One recurring challenge in the current marketplace is the need to keep a steady hand and remain true to the core underwriting principles that have made us successful. Maintaining our culture that promotes technically sound and collaborative underwriting will allow Great American to remain an exceptional, long term player in the environmental marketplace. 

 Henry Nealis, Specialty Products – Environmental, Zurich North America:  I have been challenged by reviewing the volume of new business that has been forced out into the marketplace in addition to the normal amount of business typically in the marketplace.

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Where do you see the biggest opportunities for agents?

 Kirk Davenport, Divisional Vice President, Great American Insurance Group:  The demand for environmental liability products continues to increase. Clients are becoming more aware of their environmental exposures and how the environmental liability products can mitigate those exposures.  Many construction contracts and purchase and sale agreements now specifically require environmental insurance. In addition, many lenders are requiring coverage as part of their loan underwriting requirements. 

 Henry Nealis, Specialty Products – Environmental, Zurich North America:  I see real estate redevelopment as a big opportunity for agents. The business is usually transactional but the longer term premiums can be significant.

 Amanda Duncan, President, PartnerOne Environmental:  Even with these conditions, agents need to focus on providing quality to their insureds. The upside of this market is product availability and lower premiums, which should allow for agents to sell more environmental coverages to their insureds.

John Termini, Managing Director - Environmental & Energy Product Line, Markel Corporation:  Agents could benefit by reviewing insureds environmental exposures and comparing those to the coverage placed by the prior insurance team. More often than not we receive insurance submissions where the coverage in place is inadequate based on the exposure and is illusory or has gaps in coverage. We would all agree the ubiquitous nature of environmental exposures throughout every industry segment, however, providing risk based solutions is tough for generalists. For example we customarily see products exposure risks that have Contractors Pollution Liability (CPL) coverage where they should have had Products Pollution and/or Pollution Legal Liability Site Coverage. Although CPL is a valuable coverage a manufacturer who doesn’t do construction activities wouldn’t benefit from this coverage and probably has a gap on its products exposure.

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If you could speak directly with insureds, what would you want them to know?

Amanda Duncan, President, PartnerOne Environmental:  Cheaper is not always better.

John Termini, Managing Director - Environmental & Energy Product Line, Markel Corporation:  I would suggest they develop long term relationships with the insurance providers as when claims become tough you don’t want to be building relationships. Too often claim situations can go badly very quickly and the insured is reliant upon the insurer to make whole on their promise and having a working relationship with the carrier can help make the entire process go smoothly.

Kirk Davenport, Divisional Vice President, Great American Insurance Group:  When evaluating environmental liability options please take into consideration if the market will be around for the long term to properly and promptly service the account and ultimately fulfill its obligations under the insurance contract. Are the carrier’s goals and culture aligned with your own? Are the carrier’s underwriters rewarded for client satisfaction, creativity, long term stability and profitability or simply top line production? 

Henry Nealis, Specialty Products – Environmental, Zurich North America:  I would recommend they select a broker that is an environmental specialist.  Environmental insurance requires specialized knowledge and the coverage often is tailored to the specific needs of the client.  An experienced broker is critical to this process.

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We thank our partners for giving their insight on this important topic. Beacon Hill encourages all of our agents and their insureds to thoroughly research the companies quoting their business. For more information or to talk with us about the factors we believe agents should consider when choosing to offer a company’s policy in any specialty area, contact us.