According to Aaron Carfagnini (pictured above), AVP & product line leader, environmental, Markel, there’s an increasing lack of availability when it comes to excess environmental in the Canadian marketplace – and it is something worth paying attention to as we move into the latter half of 2021 and then 2022.
“Canada has few carriers offering an expanded suite of environmental products and even fewer carriers offering an excess environmental impairment liability product,” Carfagnini explained. “I believe this is due to the highly competitive nature of environmental insurance where most carriers approach accounts as an ‘all or nothing’ proposition. This differs from other lines of business such as general liability, where carriers take the approach of spreading risk between primary and excess layers.”
“The ‘all or nothing’ approach has historically been successful with the majority of carriers deploying all of the required capacity at the account level but recently we’ve seen several carriers retract limit deployment. The reasons for restrictions in capacity have varied but we’ve seen reduced capacity 1) at the account level due to poor performance, 2) with classes of business with perceived high exposure or severity and 3) with specific or all environmental product offered by a specific carrier.
“Carriers are now managing their capacity and would only put up limits depending on class of business and risk performance,” agreed Janet Subillaga (pictured below), senior underwriter, environmental impairment liability, Markel. “It now opens up for other carriers to participate in writing an account.
“Larger companies are now being more cognizant of their environmental exposures and are taking steps to mitigate those exposures by transferring the risk and purchasing more limits. Additionally, carriers are trying to limit their exposure, hence the need to find other carriers who have the ability to write excess to fill the tower required. Also, these large risk managed companies do not want to put all limits with one carrier in case of insolvency of the carrier.”
All of which requires a tailored approach to excess environmental from Markel. How exactly does it go about this?
“We have the ability to make quick decisions,” Subillaga said, “as we have authorities locally and are able to provide terms in a timely manner.”
“Aside from being one of a select few markets offering the coverage,” Carfagnini added, “we’ve had success partnering with our colleagues in the US to provide cross border excess solutions.”
And outside of future trends and their handling, the importance of excess environmental is something continually highlighted by the headlines.
“I don’t know of any situations where losses have pierced the excess layer of an environmental account,” reflected Carfagnini. “However, two notable environmental disasters – Mount Polly Mine and Lac-Megantic – resulted in high priced clean-ups which would have eroded any pollution limit available.”
“In addition to these,” Subillaga said, “there are two other environmental incidents that resulted in not only significant clean-up costs but substantial bodily injury and property damage claims – the Sunrise propane explosion in Toronto and the Enbridge spill in Michigan. These losses definitely eroded any pollution limits available.”
