Risk managers operating without a specific environmental risk policy should not assume that their environmental exposures would be picked up by general liability insurance, warns a new report.
The Global Management of Environmental Risk report, issued by Chubb last week in collaboration with global law firm Clyde & Co, noted that general liability insurance tends to cover only sudden and accidental pollution. The more difficult and costly claims relating to historic issues or gradual environmental damage are excluded from the cover.
“Across all territories, one of the biggest environmental risks facing companies is the gradual release of pollutants into the natural environment. But this is often where traditional insurance cover falls short,” said the report.
These gradual environmental risks would be the very purpose of environment impairment liability (EIL) cover. The report points out that dedicated multinational environmental risk policies also have the additional benefit of providing first party cover for environmental risk events, and cover and assistance in the event of regulatory action being taken.
“The rising level of environmental legislation across the globe is putting increased pressure on firms to prove compliance with rules and regulations across all its bases of operations. And all of this is done against a backdrop of little or no uniformity across jurisdictions,” said the report.
“A multinational programme can provide access to a network of specialist environmental professionals, and help establish routine and preventative maintenance programmes that are embedded into the risk management framework of the company, as well as taking into account the intricacies of the insurance policies contained within the programme.”
The report also provides a practical four-point checklist of questions to ask when establishing insurance and risk management programmes, as well as overviews of the latest regulatory changes across a number of leading regional markets.
Questions a risk manager should ask before setting up such a programme are:
- Where do you think you are most likely to have a claim, and where are the strictest environmental regulations?
- Are you covering the minimum regulatory requirements for insurance provisions?
- Does your insurer have adequate local knowledge?
- Could your operational sites be exposed to legacy contamination issues?
The report can be found here.