What’s a hot topic in environmental insurance?
What’s a hot topic in environmental insurance? | Insurance Business Canada
Environmental
What’s a hot topic in environmental insurance?
Brokerage head on how to safeguard a client with their sights on international expansion
Environmental
By
David Saric
In 2024, Canadian businesses looking to globalize their operations must pay close attention to varying regulatory frameworks and how they can make them more vulnerable to potential losses or legal action.
“A lot of our Canadian domicile clients are expanding their operations and global footprint through organic growth, acquisition activity, outsourcing operation and expanding distribution channels,” said Amanda Modica (pictured), Willis Towers Watson’s (WTW) head of environmental and professional broking.
“Understanding how the regulatory framework, environmental regulations, tax implications, and assurance requirements are across multiple jurisdictions is increasingly important.”
In order to safeguard an insured through fulsome insurance coverage, Modica believes brokers should be mindful of the following:
Does their insurer have an international infrastructure?
Which insurers have experience in those countries and are they placing local paper there?
Are there any local services provided such as underwriting, engineering claims handling or any environmental expertise in those other countries?
Partnering with a global broker with a worldwide network to confirm that they are getting a collaborative and consistent approach across the global program.
The WTW leader does not view globalization as a concern for insureds, but rather as an opportunity for insurance professionals to work closely with their clients in order to manage risks correctly.
In an interview with Insurance Business, Modica spoke about how predictive modelling can help clients deal with the impacts of climate change more proactively, why underwriting PFOS risks is not sustainable in the long term and why more environmental insurers are entering into the Canadian market.
Predictive modelling as an important frontier in environmental insurance
Climate change and catastrophic weather events are proving to be quite detrimental for both carriers’ and brokers’ books of business, as claims ramp up in cost and severity.
Modica recalled a client whose heavy chemical manufacturing facility was hit by a storm and resulted in a fire on site which rendered the plant a complete write off.
“This also resulted in a large amount of commingled contamination from the operations on site, pre-existing conditions on site, new conditions from the fire suppression, the emergency response and surface water runoff,” she said.
“The commingling of contamination resulted in a large loss for this particular insured as it relates to severe weather.”
With destructive loss events expected to continue throughout 2024, it is imperative that brokers make use of predictive modelling and data analytics to provide actionable insights and a smarter way to place risk.
“Brokers must align program limits with a client’s unique risks and historical loss experience, offering analytics as a layer of proactive risk management in the environmental space,” Modica said.
“Utilizing analytics for other lines of business, such as P&C, also allows us to see a client’s overall insurance program to understand the extent of environmental coverage that’s provided, identify potential gaps and then find ways to fill them — looking at how these coverages interact as a more holistic program.”
However, it is most beneficial to utilize data analytics and predictive modelling collaboratively within the insurance supply chain.
“Sharing quality data with our market partners is absolutely key, because we can demonstrate how vulnerable or stable our client’s portfolio is in terms of being affected by climate change and severe weather events,” Modica said.
The problem with PFOS and environmental insurance
As PFOS becomes a hot topic in legislative circles, insurers are becoming more stringent with underwriting this risk.
“Many insurers in the Canadian market are continuing to underwrite the exposure on a case-by-case basis. We are beginning to see absolute exclusions on environmental placements and property casualty programs as well,” Modica said.
As a result, the WTW leader believes that underwriting this risk will not be sustainable in the future because of stringent regulations that are expected to be placed on to businesses that handle this chemical.
“We’ve seen this already in the United States,” she said.
“However, it’s absolutely something that our clients will need to manage, just not through traditional insurance.”
The robust nature of the Canadian environmental insurance market
While certain segments of the Canadian insurance industry are still experiencing a hardened market, the same cannot be said about environmental books of business.
“We’ve seen a lot of the environmental insurers take a really good review of their books, as well as reevaluate their appetites, capacity and the coverages that they’re providing,” Modica said.
“The environmental market continues to be extremely competitive and dynamic, relative to the overall casualty market. I feel that the environmental market is stabilizing at the right pace.”
She believes that Canada is a safe place for businesses to spend their money, as a lot of foreign investments are made into various construction and redevelopment projects.
“The long-established environmental markets remain strong. We’re seeing new capacity through American domiciled insurers looking to expand their Canadian book of business, as well as capacity out of London,” Modica added.
“There is a lot of activity and a lot of opportunity for new business here.”
Related Stories
Keep up with the latest news and events
Join our mailing list, it’s free!
