Rate predictions
Rate predictions: Environmental
| |
Trend |
Range |
| Contractors pollution liability (CPL) |
 |
+5% to +10% |
| Site pollution liability (PLL/EIL) |
|
+5% to +15% |
| Combined environmental + casualty/professional/excess |
|
+5% to +20% |
Key takeaway
The 2022 environmental marketplace will likely face emerging exposures, carrier changes (personnel, products, appetite), a constricting site pollution market, as well as increasing claim activity and costs associated with remediation and defense costs; but we fully expect it to respond to these challenges with dynamic coverage and product innovations that will fuel its further expansion.
We predict a continuation of upper single-digit and low double-digits rate increases for short-term environmental renewals (three-year policy term or less) for an equal policy term — though a slight rise in these increases may be seen across all lines for 2022 as carriers look to keep pace with the increasing costs of remediation and claims.
- Although rate increases have trended lower than other standard casualty lines for renewals with equal policy durations, longer-term environmental policies (greater than three years) are beginning to experience a notable hardening that manifests as a reduction in coverage appetite, policy term, and capacity offered at renewal.
- While a second major market has exited the site pollution market in North America and others look to reduce their capacity exposure, aggressive new entry (and “new to retail”) environmental markets are mostly keeping rate increases in check as they attempt to replace capacity (and gain market share) vacated by more established markets.
- The use of analytical tools continues to expand for companies interested in assessing their total cost of environmental risk as well as benchmarking their environmental insurance programs against those of their peers.
Environmental-related issues (including extreme weather, climate change, human environmental disasters, biodiversity loss and natural resource crises) continue to be among the highest exposures identified by the World Economic Forum in terms of impact.
- Discussion and interest in coordinated programs to address resulting remediation and tort exposures (with traditional environmental insurance) and economic damages (with parametric insurance/alternative risk transfer) are expected to increase.
- ESG (environmental, social and governance): Environmental insurers are evaluating their book of business for those industries contributing to climate change. We are seeing a restricting of available markets, as well as higher rate increases, for these Insureds. In addition, we are seeing increased regulatory enforcement of certain industries located in communities that are the focus of state and federal environmental justice initiatives. Regulators are filing lawsuits against these companies to enforce cleanup mandates, as well as for natural resource damages.
Claim activity related to redevelopment of brownfield properties continues — although carriers try to limit exposure by adding exclusions associated with historic fill, dewatering and voluntary site investigations.
- We are also seeing increased claim activity relating to stormwater run-off from construction sites, with claims brought by project owners, citizen action groups and regulatory agencies.
- Mid-term modifications (i.e., policy term) requests to multiyear project policies written before the pandemic are often only granted with accompanying COVID-19 and communicable disease exclusions. Similar exclusions are to be expected on new CPL placements, although coverage for mold and Legionella remains available. Each carrier’s form needs to be evaluated for potential coverage.
- Indoor air quality coverage (mold and Legionella) has become more difficult to secure and is increasingly subject to sublimits, higher retentions and per bed/door retentions for the healthcare and residential real estate sectors.
- Per- and polyfluoroalkyl substances (PFAS) continue to be a major focus of concern for environmental insurance markets. As businesses with past or current exposure to PFAS risk see increased activity from environmental regulators as well as third-party lawsuits, carriers are all but eliminating coverage for PFAS. We are seeing similar trends with other chemicals of concern, such as ethylene oxide, and we expect carriers to similarly include coverage restrictions for those chemicals in the near future.
Disclaimer
Willis Towers Watson hopes you found the general information provided in this publication informative and helpful. The information contained herein is not intended to constitute legal or other professional advice and should not be relied upon in lieu of consultation with your own legal advisors. In the event you would like more information regarding your insurance coverage, please do not hesitate to reach out to us. In North America, Willis Towers Watson offers insurance products through licensed subsidiaries of Willis North America Inc., including Willis Towers Watson Northeast Inc. (in the United States) and Willis Canada, Inc.
