Environmental Liability Risk Trends

Transcription

1 RISK MANAGEMENT FORUM 2007 GENEVA, 30 SEPT 3 OCT 2007 Environmental Liability Risk Trends Simon White Environmental Branch Manager XL Insurance

2 The Insurance market How does it currently respond to Environmental Liabilities What is Environmental Impairment Liability Insurance? How does it fit in? A pollution incident What are the liabilities Where are the costs How would an XL Insurance Environmental Policy respond Environmental Liability Directive Whats new? Whats Insurable?

3 Environmental Liabilities from an Insurance perspective Owned / Leases Property Property Insurance Total Premium (UK) billion Environmental Insurance: 1 st party & 3 rd Party Total Premium (UK) - 40 million (0.015% of UK General Liability Premium) France: 27m Spain: 8m Italy: 25m Germany: 250m + US market: over 1.5 billion* 3 rd Party Damages: Bodily Injury / Property Damage General Liability / Public Liability Total Premium (UK) billion *Source: International Markets for Environmental Insurance. Laura Bloodgood. Industry Trade and Technology Review June/July 2005)

4 The Insurance market How does it currently respond to Environmental Liabilities What is Environmental Impairment Liability Insurance? How does it fit in? A pollution incident What are the liabilities Where are the costs How would an XL Insurance Environmental Policy respond Environmental Liability Directive Whats new? Whats Insurable?

5 Residential Properties Woodland Manufacturing Facility Insured Site Agricultural Fields River

6 Emergency Costs

7 Remediation Costs On-site and off-site Investigation costs Monitoring costs Cleanup costs Legal costs

8 Third party Damages Loss of use of the farmers field Damage to crop Damage to livestock Loss of fishing income from river Loss of water abstraction from river Damage to buildings

9 The Insurance market How does it currently respond to Environmental Liabilities What is Environmental Impairment Liability Insurance? How does it fit in? A pollution incident What are the liabilities Where are the costs How would an XL Insurance Environmental Policy respond? Environmental Liability Directive Whats new? Whats Insurable?

10 POLLUTANTS means any solid, liquid, gaseous or thermal pollutant, irritant or contaminant, including but not limited to smoke, vapours, soot, fumes, acids, alkalis, toxic chemicals, hazardous materials, waste materials, including medical, infectious and pathological waste, and low level radioactive waste. POLLUTION CONDITIONS means: 1. the discharge, dispersal, release, seepage, migration, or escape of POLLUTANTS into, under or upon land, or structures thereupon, the atmosphere, or any watercourse or body of water or groundwater; or 2. the illicit abandonment by anyone other than the INSURED, and without the knowledge of the INSURED, of such POLLUTANTS in the soil or groundwater at the COVERED LOCATIONS.

11 XL INSURANCE ENVIRONMENTAL POLICY A - LEGAL LIABILITY FOR BODILY INJURY AND PROPERTY DAMAGE B - ON-SITE REMEDIATION EXPENSE FOR SUDDEN AND ACCIDENTAL POLLUTION CONDITIONS C - ON-SITE REMEDIATION EXPENSE FOR SUDDEN AND ACCIDENTAL AND GRADUAL POLLUTION CONDITIONS (includes costs for the study, monitoring, removal, treatment or neutralisation of an Pollution Event) D - OFF-SITE REMEDIATION EXPENSE FOR DAMAGE TO THIRD PARTIES FROM SUDDEN AND ACCIDENTAL POLLUTION CONDITIONS E - OFF-SITE REMEDIATION EXPENSE FOR DAMAGE TO THIRD PARTIES FROM SUDDEN AND ACCIDENTAL POLLUTION CONDITIONS F EMERGENCY COSTS G - LEGAL DEFENCE EXPENSE

12 The Insurance market How does it currently respond to Environmental Liabilities What is Environmental Impairment Liability Insurance? How does it fit in? A pollution incident What are the liabilities Where are the costs How would an XL Insurance Environmental Policy respond Environmental Liability Directive Whats new? Whats Insurable?

13 Remedying Environmental Damage 120 Biological Productivity (%) Time Manufacturing Facility River: - Sensitive Ecological Habitat - Rare Species Natura 2000 Site: - protected species - rare habitat

14 Primary Remediation: any remedial measure which returns the damaged natural resource [back to its] baseline condition Purpose of primary remediation: is to restore the damaged natural resources and/or services to, or towards, baseline condition. (1.1.1) Biological Productivity (%) Remedying Environmental Damage Time

15 Complementary Remediation: any remedial measure.. to compensate for the fact that primary remediation does not result in fully restoring the damage natural resource Remedying Environmental Damage 120 Biological Productivity (%) =??? Time

16 Complementary Remediation: any remedial measure.. to compensate for the fact that primary remediation does not result in fully restoring the damage natural resource Purpose of complementary remediation: Baseline condition not restored provide a similar level of NR, including, as appropriate, at an alternative site should be linked geographically to damaged site (1.1.2) Biological Productivity (%) Remedying Environmental Damage 50% Time 50% 50%

17 Compensatory Remediation: compensate for interim losses.. from the date of damage occurring until primary remediation has achieved its full effect. Purpose of compensatory remediation: compensate for interim loss of NR. Includes: additional improvements (1.1.3) or Monetary valuation (1.2.3.) Biological Productivity (%) Remedying Environmental Damage Time The goal of REMEDE is to develop, test and disseminate methods appropriate for determining the scale of complementary and compensatory remedial measures necessary to adequately offset environmental damage (so called resource equivalency methods ).

18 Compensatory Remediation: The Environment (Protected Species & Natural Habitats) now have rights

19 Within the definition of CLEANUP COSTS is included NATURAL RESOURCE DAMAGES as laid out under Annex II of Remedying of Environmental Damage of the ENVIRONMENTAL LIABILITY DIRECTIVE. NATURAL RESOURCE DAMAGES means any costs for which an INSURED is legally liable to pay in order to remedy environmental damage, in relation to water or protected species and natural habitats through the restoration of the environment to its baseline condition by way of primary remediation, complementary remediation and compensatory remediation as laid out under Annex II of Remedying of Environmental Damage of the ENVIRONMENTAL LIABILITY DIRECTIVE. For the sake of clarity, it is agreed and understood that the terms laid out in bold but not capitalised shall have the same meaning as set out in Article 2 of the ENVIRONMENTAL LIABILITY DIRECTIVE, but only with respect to the coverage provided for NATURAL RESOURCE DAMAGES: Baseline condition Environmental damage Protected species and natural habitats

20 RISK MANAGEMENT FORUM 2007 GENEVA, 30 SEPT 3 OCT 2007 Thank you very much for your time and attention Further information please contact: Simon White Simon.white@xlgroup.com