Many SMEs will only discover that they are uninsured for environmental liabilities when faced with a regulatory demand for environmental restoration which may threaten the continued existence of their business.
The International Underwriting Association's (IUA) 2013 report ‘Environmental Loss Scenarios’ identified the potential 'black hole' in coverage in standard liability policies for many environmental risks. This built on the conclusion to IUA's earlier report 'Environment Risks: insured or not?' that specialist environmental insurance products are available in the market to fill the gap.
Unfortunately, specialist environmental insurance products are often designed for businesses with exposure to heavy environmental risks such as hazardous waste disposal, oil pipelines and brownfield remediation where losses can run into millions of pounds and underwriting requires analysis of detailed engineering information.
‘This approach is inappropriate for the vast majority of the 50,000 incidents reported each year in the United Kingdom which arise from the day-to-day operations of routine businesses,' says Dr Malcolm Aickin of Environmental Impairment Limited, who was part of the team that created the first EIL policy back in the 70s. ‘Analysis of the Environment Agency’s NIRS database confirms the Agency’s assertion that their interventions are increasingly cost effective, but’ adds Dr. Aickin, ‘they also show the Environment Agency has got much better at identifying the sources of pollution incidents and recovering the costs of their larger investigations’.
‘These can run to hundreds of thousands of pounds and threaten the survival of a small business.’ Comments John Butcher, a senior broker at 'Independent Broking Solutions who are working with Environmental Impairment Limited to make coverage available as an optional extension to existing liability cover. IBS,
FARADAY Underwriting Limited is cooperating with Independent Broking Solutions and Environmental Impairment Limited to offer policies with a separate EIL section for small to medium sized enterprises. “We believe this offers valuable insurance protection to our SME clients at affordable premiums" says Roger Nash, FARADAY's Liability Underwriting Manager.