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Digital EditionEnvironmental Insurance Market Faces Capacity Challenges Amid Emerging Contaminant Risks
The environmental liability insurance market remains stable with a broad range of competing carriers, though excess capacity challenges and emerging contaminant risks are reshaping coverage availability and pricing, according to a recent market report from specialty wholesale broker Amwins Group.
While the environmental insurance market maintains overall stability, pricing trends vary by coverage type. Primary casualty lines generally see pricing from flat to 10% increases, depending on operations, size, and location of the insured, according to the report. Excess pricing follows similar patterns except when excess auto coverage is included, where pricing fluctuates significantly based on operations, fleet composition, and venue.
The market continues evolving as new contaminants and regulatory concerns emerge, Amwins reports, with several substances generating increased attention and litigation.
Ethylene oxide (EO), classified as a carcinogen by the EPA, has sparked growing lawsuits despite uncertainty around the EPA’s assessment. Microplastics found in food, beverages, and human tissue face increased regulatory scrutiny with early litigation focusing on consumer fraud claims. Other concerning contaminants include formaldehyde, phthalates, Legionella, 1,4-dioxane, and 6PPD-quinone (a tire wear byproduct linked to environmental harm), according to the report.
State-level enforcement of financial responsibility regulations has intensified, particularly for gas stations, following a slowdown of enforcement actions during COVID-19. As the report notes, “More inspectors are conducting audits, particularly for gas stations, to ensure they carry the required coverage.”
This has driven an uptick in submissions from businesses that previously lacked proper environmental coverage, Amwins noted.
Capacity Constraints and Coverage Challenges Intensify
One of the market’s most significant challenges is a reduction in excess capacity, primarily stemming from large auto claims, the report states. This issue is especially pronounced in Texas, where nuclear auto verdicts have caused carriers to scale back exposure. Carriers that historically provided full $10M in excess limits have reduced those limits to $5M in recent years, with some now declining to renew accounts altogether, according to Amwins.
For businesses with aging infrastructure, securing coverage has become increasingly difficult. Carriers are tightening policy terms and imposing higher deductibles for older locations, while the surplus lines market plays a critical role in filling coverage gaps where standard markets have retreated, the report says.
Coverage limitations remain significant across the market, according to Amwins. A PFAS exclusion in environmental policies continues to be mandatory, particularly given ongoing regulatory uncertainty about dealing with the so-called forever chemicals, the report noted.
Additionally, wildfire exclusions are becoming more common for contractors operating in high-risk states like California, reflecting growing unpredictability of wildfire exposure.
Economic factors are also influencing environmental coverage decisions. Inflation impacts environmental and energy contractors whose revenues fluctuate with oil prices, making favorable rates difficult to secure during revenue declines due to minimum premium requirements, the report noted. Simultaneously, some businesses facing inflationary pressures are choosing to go without coverage or increase deductibles to control costs, especially in industries where pollution liability is discretionary.
Strategic Approaches for Navigating Market Conditions
In light of more volatile excess casualty coverage for auto risks, businesses should prioritize fleet controls, the report advises. The more robust an insured’s fleet safety measures and employee vehicle use policies, the stronger their position for securing favorable terms, Amwins stated.
Companies operating aging locations and tank systems must implement proactive risk management strategies. The report recommended that “insureds must have a long-term plan for system upgrades” as insurers may eventually decline coverage based on aging equipment.
Additionally, reviewing policy endorsements closely is crucial, as carriers have unique terms that may allow businesses with older tanks to maintain coverage under specific conditions, the report advises.
View the full report here. &
