Protecting the environment is a board-level issue in companies of all types, across the world. In the latest in our series of interviews with product and country leaders, Sylvie Monereau, Product Leader – Environmental, APAC & Europe, and José Ramón Morales, Country Manager, Iberia, discuss the role that environmental impairment liability insurance can play in helping our clients manage this ever-evolving risk.
What types of clients are buying environmental impairment liability coverage and how can it help them manage exposures?
Sylvie Monereau: We have a great diversity of clients for environmental liability insurance, ranging in size from large to small, and from across multiple geographies and industry sectors. Some of these clients have multinational operations, which means their coverage needs to address a wide range of tort liability and environmental liability regimes – often these clients have global insurance programs that help transfer these risks.
As well as first-party exposures, such as the need to respond to a pollution event on their own property – this includes emergency response costs, clean-up-costs, and business interruption –our clients need to consider third-party environmental liabilities too. Environmental impairment liability can cover clean-up and defence costs and losses associated with damage to neighbouring land, property or physical damage to persons, as well as some consequential business interruption exposures. In some regions, we can offer clients access to emergency response services that can assist them beyond crisis management coverage in managing reputational and public relations matters if a pollution event occurs. We can also offer environmental risk insurance that covers our clients that are providing services to public or private entities. Finally, risks associated with the disposal or transportation of waste or by-products can also be included in the coverage.
How has the European Environmental Liability Directive affected the exposures clients face and their demand for environmental liability insurance coverage?
Sylvie Monereau: Although the Environmental Liability Directive applies across the European Union – and the United Kingdom – it has not been transposed uniformly across the region. In some countries – notably Spain and Portugal – transposition of the ELD introduced some mandatory financial guarantees, which can take the form of insurance coverage.
Portugal first enforced the ELD in 2010 and has more recently put in place tighter controls to check compliance with the local legislation. Spain introduced the ELD progressively starting with the most hazardous activities and was later to adopt financial guarantees.
We have adapted our environmental wordings in both countries to offer coverage to our clients – whether they be Iberian headquartered or part of an international environmental or casualty program – for their ELD obligations.
Elsewhere, we have adapted wordings to fit the environmental liability regimes in place. In France, for example, in 2016, the Ecological Damage law was enacted under the Civil Code, creating a new regime that goes far beyond that enshrined in the ELD with which it now exists in parallel.
In other countries, however, the ELD was essentially used as a tool to reinforce or to fill the gaps in existing environmental legislation.
All this means that, not only are our clients facing different levels of liability in countries where they operate but buying maturity and appetite for coverage varies among our clients and potential clients. In some markets, we as underwriters and our broker partners have an important role to play in helping to educate clients about the potential size, scale, significance and changing nature of environmental impairment liabilities and the need for insurance coverages.
Added to this, the European Commission currently is considering certain reforms to the ELD to increase its efficiency and is also debating the idea of a Soil Directive. This is something we, and our clients, are following with interest.
José Ramón Morales: This is one of the reasons why it is important for us to have regional leaders for our product lines, and leaders with such knowledge and depth of experience as Sylvie. Having teams of experts across Europe gives us the ability to better understand our clients’ needs and communicate with them effectively wherever they operate.
How are clients with operations in several countries or regions able to manage and transfer their environmental liability risks?
Sylvie Monereau: For many of our multinational clients, a global program is a good solution to help manage and transfer the environmental risks they face in various countries where they operate; a master policy gives them a good level of coverage in their major or home market and then local policies can offer the appropriate levels of coverage in other locations.
Our multinational clients tend to have very well-developed sustainability and environmental policies, that form a crucial part of their enterprise risk management programs. Strong and sophisticated risk management is key to demonstrate a knowledge of exposures and how to mitigate them and, therefore, to be well-insured in the event that anything goes wrong. When clients have good risk management in place it enables them to use the services that environmental risks insurance can offer to best effect.
José Ramón Morales: Indeed, at 色多多视频we have the ability to offer our clients services from risk consulting, though to underwriting, through to claims. Because our teams comprise experts from lots of different backgrounds – from engineers to lawyers – we are able not only to work effectively with our clients on their current risk management but also to accompany them on the journey to a future energy transition. As our clients are using innovation to create more sustainable business models, so are we. Not only are we using innovation to improve our own sustainability, we are using things like artificial intelligence to better understand our clients’ exposures.
