This article was produced in partnership with SUM Insurance.
Desmond Devoy, of Insurance Business Canada, sat down with Christine Nauth, vice president and EIL practice leader with SUM Insurance, to discuss SUM’s latest pollution insurance covering contractors and their hard work on construction sites.
SUM Insurance is shaking up EIL and pollution liability policies with a new policy designed for contractors and their construction projects.
The new wording will be unveiled this fall, following requests from clients in the industry.
“It’s been a couple of years in the making, and it’s finally getting released this year,” said Christine Nauth (pictured), vice president and EIL practice leader with SUM Insurance, during a recent interview. “It’s specific to contractors,” and covers environmental liability arising from their operations such as equipment, which have fuels and other chemical liquids on board that can get moved around from site to site. The construction site itself is open to pollution exposure through underground utilities such as fuel tanks and sewer lines.
The new contractor policy has a healthy mix of backing, with 40% coming from Lloyd’s, and the remaining 60% from domestic markets on an in-house contract.
SUM utilizes a pool or subscription approach that creates continuity in their appetite and capacity. Any individual insurers “can change a little bit more drastically” when writing a risk 100% versus participating for a small part in a SUM pool. Therefore, “we have a little more stability” – an important trait in choosing a risk transfer partner, and a benefit of the SUM structure, said Nauth.
For the past 12 years, SUM has been an industry expert in EIL insurance, with offices in Calgary, Montreal and Toronto.
“Even as an MGA we’re still a standard market when it comes to EIL,” Nauth said. But theirs is not a typical pollution insurance policy which comes loaded with exclusions. Rather, “we like to highlight more of what coverages we are covering as opposed to excluding,” she said. “So it’s pretty broad.”
Its underwriters carry an average of 10 years experience in the EIL field and “I would say it shows our dedication and discipline to the practice of underwriting and that helps make us reliable and have our market support us for this long without wavering.”
So what has she noticed changing in the EIL field recently?
“We noticed new MGAs entering the space within the last couple of years and you’re seeing some of them exit now,” she said.
“You need to have strong discipline to be in this space,” she said. “This is a specialty line that some brokers rely on us to guide them through.”
Nauth brought her own expertise to the field, but not originally from insurance. She studied environmental studies at Toronto’s York University. When she graduated, hiring had dried up in her field of study. However, an “insurance company was looking for people that had an environmental background, so I just jumped at the chance and essentially have not looked back.” That environmental background “helps me greatly with understanding information” on green matters. “There’s a lot of science and technical reading involved in environmental underwriting, especially when it comes to sites and chemicals,” she explained.
That level of understanding is essential in understanding what could be an easy clean-up versus a more high-risk exposure.
Another change in the space comes from Canada’s crying need for new housing. That means a lot more building and “developers will want to protect their investments by getting pollution insurance for those locations,” she predicted.
New regulations are also seeing to it that most contractors carry $5 million in limits for pollution coverage, as of 2020.
“It’s taken a long time for it to have a major impact, but that’s the standard for development according to the Canadian Construction Documents Committee (CCDC),” she said. “Today we are seeing that requirements trickle down to general contractors and subcontractors.”
The price of pollution policies can vary from sudden and accidental coverage, which can be in the low thousands, to pre-existing coverage which can be hundreds of thousands. And “not all brokers are well-versed in this area. So pricing may be the deciding factor, but they should consider the value that pre-existing and other differential coverages provide.”
She encourages brokers to pay attention to the language in a policy and make sure that it is coverage that the client needs. Wordings among the insurers are not standard. Every company has its own variation and levels of coverage.
Nauth pointed out that she and her team are always available to answer questions, and that providing competent placement advice is a large part of the SUM value add in this field.
“We do have an in-house claim team. I’m directly involved with claims, and I talk to third party adjustors as well,” Nauth said. “There is a direct contact and direct line of communication between all of the parties involved, so there’s no gaps in communication. We feel SUM’s formula, bringing expertise to capacity, and service to opportunity in a sustainable way, creates value for our insureds.”
