Preventing Skyrocketing Environmental Liabilities

Transcription

1 Preventing Skyrocketing Environmental Liabilities Presented by: Ernie Salas Western Regional Manager, ACE Environmental Risk ACI-NA Insurance & Risk Management Conference January 11, 2007 Las Vegas, Nevada

2 ACE Limited Members of the ACE Group of Companies have offices in more than 50 countries and authority to do business in more than 140 countries. $ 16.5 billion market capitalization $ 65.4 billion in total assets $ 6.4 billion net premiums written $ 12.5 billion shareholders equity $ 2.0 billion operating cash flow * All numbers are as of or for the six months ended June 30, = ACE Locations

3 ACE Environmental Risk Full Service Environmental Carrier 4 years operating experience 40 Underwriters people strong Most experience underwriters in the environmental insurance industry Offices in Boston, NY, Phila., Atlanta, Chicago, Houston, LA, and SF. Prior EIL experience with UW, Claims, Broking with AIG, XL (ECS), Chubb, Quanta, Marsh, Kemper 3

4 Agenda EIL Overview Key Exposures General Trends Mitigation Insurance Products 4

5 Environmental Impairment Liability 1986 Absolute Pollution Exclusion The Discovery, discharge, dispersal, release, escape, migration, or seepage of any solid liquid, gaseous or thermal irritant or contaminant Includes smoke, soot, vapors, fumes, acids, alkalis, chemicals, fungi hazardous substances, or waste materials, on, in, into or upon land and structures thereupon, the atmosphere, surface water or groundwater 5

6 The Environmental Insurance Business - Overall EIL Marketplace: ~$1.1 Billion - Broad Customer Base - Primary markets: ACE AIG Chubb XL Zurich - Not a standard line: Heavily Transactional Growth Driver: Contractual vs. Operational - Heavy Engineering Costs - Tightened Capacity/ Terms & Conditions- 6

7 What are the Environmental Exposures? 7 Contractors/Sub-Contractors Wastewater Treatment Solid Waste Disposal Fuel Spills Indoor Air Quality/Mold Asbestos De-Icing Fluid Recycling Chemical Storage Metal Finishing Water Treatment Battery Disposal Lead Paint Groundwater Contamination Used Oil PCBs Above Ground Storage Tanks Underground Storage Tanks Paints

8 Key Exposure: Wastewater Treatment Accidental Discharge of Contaminated Effluent Leaking Storage Tanks Groundwater Contamination Improper Storage and Disposal of Sludge Air Emissions Storm Water Run-off De-icing Fluid 8

9 Key Exposure: Tenants Aircraft Maintenance Storage/Disposal of Waste Oil & Fluids Paint Storage and Disposal Electroplating Fuel Storage 9

10 Key Exposure: Storage Tanks Underground & Above Ground Storage Pipelines and Dispensers Potential Leaks and Ruptures Groundwater Contamination Spills during loading and unloading 10

11 Key Exposure: Indoor Air Quality Asbestos and Lead Paint Dust Fumes: Painting, Carpet Adhesives Pesticide Application Dust - Silica Mold 11

12 Key Exposure: Indoor Air Quality MOLD No Exclusions prior to to 2004 Mold is Gold, Coverage Excluded 2004 to 2005 Bad Science Debunked; Improved Legal Defense Present Coverage readily available for most exposures 12

13 Key Exposure: Waste Disposal Location Storage Sorting / Quantity Haz Waste Disposal Regulatory Compliance 13

14 Key Exposure: Contractors / Subcontractors Fueling Operations Construction / Renovation Paving HVAC Grading and Excavation Environmental Contractors/Consultants 14

15 Key Exposure: Environmental Contractors / Subcontractors Experience & Qualifications References Size of Company Sample Reports Insurance Coverage 15

16 Key Exposure: Historical Contamination In-Place Asbestos and Lead Paint Groundwater Contamination Soil Contamination 16

17 Trends Increasing Regulatory Oversight Expanding Role of State and Local Authorities Greater Public Awareness Information Distribution via Internet Better Understanding of Financial Impacts Saving Money and Reducing Risks 17

18 Mitigation Identification of Environmental Exposures Environmental Management Systems Planning, Coordination & Communication Involvement of All Stakeholders Risk Transfer The Role of Insurance 18

19 Insurance Products Pollution Condition means the discharge, dispersal, release or escape of smoke, vapors, soot, fumes, acids, alkalis, toxic chemicals, liquids or gases, waste materials or other irritants, contaminant s or pollutants into or upon land, the atmosphere or any watercourse or body of water. 19

20 Insurance Products Premise Pollution Liability (Site Pollution) Coverage for: Existing and Unknown Pollution Conditions Accidental Discharge or Release of Pollution Conditions Third Party Bodily Injury or Property Damage from Pollution Conditions Legal Defense Transportation of Pollution Conditions 20

21 Insurance Products PPL (Premises Pollution Liability) Claims-made policy available for operational risks, typically with no retroactive date provision Fixed-site location Coverage for mold available on a buy-back basis subject to strict guidelines Pricing based on number of locations and SIC code with qualitative adjustments as outlined in the underwriting manual 21

22 Insurance Products Storage Tank Liability Coverage for: Underground Storage Tanks Above Ground Storage Tanks Pipelines and Dispensers Loading and Unloading Legal Defense 22

23 Insurance Products Cost Cap Cost Containment (Premises Pollution Liability) Coverage for: Unexpected Cost Overruns for Remediation Projects from - unknown or undiscovered contamination - poor remedial technology performance - regulatory changes 23

24 Insurance Products Cost Cap Cost Containment Overview Pollution condition is thoroughly investigated Remediation Plans with cost estimates submitted for review Deductible generally a percentage of remediation costs After deductible period, coverage pays the remaining costs Pricing can be expensive 24

25 Insurance Products Underwriting Available Environmental Site Assessments Recent Inspection Reports Environmental Management Plan Notices of Violation Prior Claims History Future Development Plans 25

26 Insurance Products Contractors Pollution Liability Coverage for: - Pollutions Conditions Caused by the Operations of a 3rd Party Contractor at your Location -Transportation of Pollution Conditions -Includes Cleanup Costs, Third Party Bodily Injury and Property Damage, and Legal Defense 26

27 Insurance Products Contractors Pollution Liability Claims Examples: - Excavation Contractor breaks fuel transfer pipeline - Fuel Spill during loading of the Fuel Truck - HVAC Contractor fails to maintain A/C system resulting in poor air quality or mold - Renovation disturbs asbestos fibers or lead paint dust 27

28 Insurance Products CPL (Contractors Pollution Liability) Claims-made and occurrence policy forms available Practice, Project, or Wrap-up Coverage Target markets include environmental, specialty and trade, and general construction Coverage for mold available as a buy-back subject to strict underwriting guidelines as outlined in the underwriting manual Pricing based on revenues with adjustments for services provided, experience of contractors and other subjective factors as outlined in the underwriting manual 28

29 Insurance Products Professional Liability Rendering or Failure to Render a Professional Service that Results in or fails to detect a Pollution Condition Claims Examples: Failure to Identify the Extent of Contamination Tank Inspection Failure to Detect Leaks Asbestos and Lead Paint Detection Remediation Plan Fails to Adequately Address Situation 29

30 General Questions? 30

31 Preventing Skyrocketing Environmental Liabilities Presented by Ernie Salas Western Regional Manager, ACE Environmental Risk 725 South Figueroa Street, Suite 2050 Los Angeles, CA