The Insurance Marketplace: Addressing Recycling Risks
As recycling has transitioned from an individual effort to a viable business opportunity, the insurance industry has matched pace, offering effective coverage for these innovative solutions.
Over the last twenty years, recycling has grown from a household effort into a global phenomenon. Recycling has been around for thousands of years in some form as people have worked to reuse where possible. With the rise of the industrial age, mass produced products have slowly become cheaper to replace than to repair, leading to a significant waste stream of old products and materials that needed to be landfilled.
Where one business sees waste, another sees opportunity. The last few years have seen an explosion of companies identifying and then profiting from the value of another person’s waste stream. While these businesses have flourished, the need for specialized insurance products has matched pace with them.
Examples of this include the recycling of waste cell phones. Hundreds of millions of phones are sold globally in a year, and close to the same number are traded in or disposed of. Companies have been established to take those phones in and recycle their components. From internal electronics, copper, circuit boards, and batteries, companies pull phones apart and recoup the value. These operations have unique environmental exposures based on their processing locations. Storage of these materials can lead to pollution issues related to run off from failed containment, as well as potential fumes from the materials or leaching into ground water. Battery storage in particular is a high hazard exposure for facilities.
Overall computer recycling runs similar risks, with the focus being the mercury in older monitors. We see many of these accounts buy Site Pollution Liability for their processing facilities, as well as buying Over the Road Pollution coverage for their vehicles that pick up used systems for corporate clients.
Another example of innovative recycling involves creating fuels for energy generation. Some businesses collect waste streams from a range of manufacturers and grind those wastes, combining them into a fuel for energy plants. These risks are able to generate revenue by disposing of someone else’s waste, and then get paid for selling the fuel.
Biofuel processing plants have a similar value proposition. Collecting waste oils and blending them into a commercially usable bio fuel is a fast-growing industry.
Both of these processes have significant pollution exposures, including the collection of the waste materials at the client’s facility, the transportation back to their own plant, and the site exposure itself.
Another exciting recycling innovation has been the recycling and reuse of landfills. Older construction and demolition landfills have discovered real value in the materials in the ground. They are excavating the old debris and recycling large amounts of it using newer technologies that were not available when the sites were opened. This is creating a meaningful income stream, while freeing up space in the landfill for future use, again an economic benefit.
Operations of these recycling facilities create similar exposures to others in that they necessitate Site Pollution coverage to address possible runoff or leaching from the location.
The pollution insurance market has been very supportive of these innovative new operations. Carriers have created new products designed to address the specific exposures of recycling operations. These include package products that combine the CGL coverage with the Site Specific coverages. This allows a sharing of limits to control costs without sacrificing quality of the coverage itself.
In some cases, these policies can also provide Products Pollution coverage as well. When the recycled product is then sold as a product for use, it is important to assess the potential risk of failure of that product, leading to a pollution claim.
A great example is companies that recondition 55-gallon storage drums. These companies take used drums that might otherwise be landfilled or cut up as scrap and reshape and recondition them. They have an initial pollution exposure from the cleaning out of the drums that needs to happen when the drums are brought it. Then, if the drum fails after it has been reconditioned, and allows a pollutant to escape, they have a products pollution exposure.
In addition to the core coverages in these package policies, carriers can provide the Over the Road Pollution coverage, coverage for Non-Owned Disposal Sites, and Business Interruption. Supporting Automobile, Workers Compensation, and Follow Form Excess are available from many carriers as well.
As recycling has transitioned from an individual effort to a viable business opportunity, the insurance industry has matched pace, offering effective coverage for these innovative solutions. We fully expect the environmental industry to continue leading the way as new and better solutions for managing our waste stream are developed.
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