Source: Canadian Underwriter, June 20, 2012
The percentage of clients buying environmental insurance has increased in recent years, although there has been a parallel decrease in the amount of limits purchased, a recent report from Marsh Inc. indicates.
“With increasing frequency, companies are requiring their contractors to carry environmental insurance — regardless of the contractor’s level of environmental exposure,” Marsh reports in Benchmarking Trends: Environmental Purchasing Trends.
The result has been more entities with lower environmental risk profiles buying policies with lower limits that are of a shorter duration.
The percentage of clients purchasing pollution legal liability (PLL) and contractors pollution liability (CPL) policies over the last four years has increased, Marsh notes.
For PLL programs, almost 10% more policies were sold in 2011 than in 2009, with average limits of $11 million per program last year compared with the high of $12.7 million in 2008. For CPL programs, average limits purchased were $7.4 million in 2011, down $3.5 million from 2010.
Insureds paid an average of $15,700 per million of PLL limits purchased in 2011 compared with $18,000 in 2008. For CPL, the average went from $14,800 to $13,900 over that period.
Factors influencing limits include increased competition in the environmental insurance market; fewer policies placed related to mergers, acquisitions, sales and divestitures; and more policies being written on a single-year basis.
The average deductible for PLL programs has remained relatively constant since 2008, at approximately $350,000. Average deductibles for CPL have decreased from a high of $304,000 in 2008 to $121,000 in 2011.
Factors contributing to decreased average deductibles include increased competition, which is driving aggressive pricing and coverage availability; carrier willingness to reduce deductibles and offer other coverage enhancements as a means of competing; and an economic environment that makes buyers more likely to purchase programs that offer lower deductibles or self-insured retentions.