What a difference a generation makes. A quarter-century ago, insurers wanted no part of pollution risk. Now they are competing for business. After the standard-lines insurance market ran away from the coverage in the mid-1980s, a handful of surplus-lines insurers began underwriting environmental impairment coverage.
That is largely how the market stood until 2008, when the crisis hit. Insurers then began rushing to provide pollution coverage to generate additional profits- a strong allurement in a soft insurance market and a weak economy. Today more than three-dozen underwriters offer some type of pollution cover.
Insurers typically design coverage according to their policyholders' needs. Site coverage- which insures against third-party claims and the cost of site cleanup- remains the most popular. But demand is growing fastest for contractors' pollution liability insurance, as more project owners insist contractors obtain cover.
The influx of underwriters in the pollution market has boosted market capacity and triggered rate competition. Depending on the risk, buyers can cobble together as much as $200 million of limits.
The drop-off in rates has been "a drastic change," says John Gibson, SVP and the environmental product line manager at Chubb Group. But they have stabilized over the past 12 months and in some cases have ticked up slightly, brokers. It remains to be seen what will happen to rates, and access, as the global economic picture stabilizes.