The environmental insurance landscape is crowded, competitive, and well…a bit complicated right now. For agents and brokers, there are ample opportunities to find broad coverage for their clients at very inexpensive premiums. Never before has the amount of capacity that exists in the environmental marketplace been as plentiful as it is at this time. Additionally, more businesses are purchasing environmental insurance than ever before due to increased accessibility, proactive risk management, and contractual requirements. While this is good news for environmental insurance carriers, it also brings several challenges that could impact a carrier’s appetite and profitably in years to come.

The traditional profitability of the environmental marketplace has created an attractive investment option for carriers looking to generate more investment income. Thus we’ve seen a continuous influx of carriers entering the marketplace over the last several years. The rush of new competition has depressed premiums considerably and pushed the envelope as far as a carrier’s appetites are concerned, bringing newer, emerging exposures into the environmental space. One example is the Auto Liability exposure, especially as it relates to Excess policies offered by most environmental carriers. Newer carriers are not accounting for the Auto exposure as most do not also underwrite Auto as part of their portfolio. Auto claims increase year after year and can easily go into the Excess layer, yet Excess pricing for higher limits is under constant pressure due to the available capacity. Facility and products driven risk have also become popular writes for environmental carriers in recent years; the casualty aspect of many of these manufacturing and operational exposures are not core environmental classes of business. Often times these new fringe carriers write coverage at lower rates than what was charged in the standard casualty market. So while expenses for companies increase so that the proper resources can be dedicated to their environmental presence, lower premiums mean lower profits.

While environmental underwriters are binding more policies than ever before, another segment of the business is also seeing a substantial increase in activity: CLAIMS. Lawsuits attack insureds from many different angles, and the existence of an environmental policy adds a new dimension, especially when so many of the policies today include broad and far reaching coverages such as Natural Resources Damage, Non-Owned Disposal Site Liability, Transportation Pollution Liability, and Products Pollution Liability, just to name a few. Contractual obligations entered into by insureds for various projects are also a cause for increased claims activity. Eager insureds, doing all they can to be awarded a particular job, may compromise their potential liability by agreeing to a contract whose terms more heavily favor an often larger project owner or Primary/General Contractor much more so than the typical environmental insured. Insureds also leave themselves vulnerable when entering into agreements with subcontractors as many times subs are not adequately insured.

While all insurance companies want to write business, especially in this competitive time, the focus for many remains building and maintaining strong partnerships with supportive producers. Managing agent and broker relationships efficiently is crucial to the success of any one underwriter, and the carrier as a whole. Seeking out these producers, and the profitable business they can bring to the table, is extremely challenging in these market conditions as submissions are plentiful but pricing may not seem adequate. Underwriters have to juggle these demands and cultivate a profitable book of business that lasts well beyond the current calendar year because terms and conditions agreed to now can have a major impact on carrier offerings down the road.