A joint report from Guy Carpenter and Verisk explores the liability risks associated with per- and polyfluoroalkyl substances (PFAS), along with litigation trends, regulatory developments, and modeling approaches for insurers.
The report highlights how Verisk Liability Analytics, in collaboration with Guy Carpenter, has developed a model to assess PFAS liability exposure in Germany, France, and Belgium. This model provides the re/insurance industry with an initial quantification of potential liability losses, reflecting the growing concern around PFAS as an emerging risk.
Emerging risks, which include unforeseen events that may have significant impacts on liability portfolios, are a key area of focus for re/insurance carriers. PFAS, often referred to as "forever chemicals," are synthetic substances that have raised substantial concerns due to their potential effects on human health and the environment.
While PFAS litigation has been prominent in the United States, resulting in more than $18 billion in settlements primarily related to environmental contamination of drinking water and soil, this issue is also gaining attention in Europe.
Verisk estimates that US PFAS-related settlements could potentially increase to between $120 billion and $165 billion as the extent of contamination in drinking water systems is further uncovered, leading to more litigation over remediation costs. This highlights the scale of financial exposure that insurers may face if similar legal actions emerge globally.
In Europe, PFAS contamination has also been detected across water and soil, as illustrated by data from the Forever Pollution Project by Le Monde and its partners. Several European governments and residents have initiated lawsuits against PFAS manufacturers, seeking compensation for environmental damage and health risks.
The report notes that new regulations, such as the updated EU Drinking Water Directive, will mandate further testing for PFAS, which could lead to increased litigation.
Recent regulatory developments, including the EU’s new Product Liability Directive and Representative Actions Directive, may also drive further legal action. As more sites contaminated by PFAS are identified, the legal and regulatory environment could lead to a significant liability event across various European nations.
While studies have provided insight into the extent of PFAS contamination in Europe, efforts to quantify the potential liability losses have been limited. The new model developed by Verisk, in partnership with Guy Carpenter, aims to address this gap by providing a clearer view of potential exposures in Germany, France, and Belgium.
The modeling of PFAS scenarios in these countries is intended to help (re)insurers better identify and manage their risk exposure.
According to the report, a significant PFAS-related liability event in these European countries could range between €10 billion and €24 billion in total potentially insurable ground-up liability losses.
The analysis suggests that dozens of industries could be affected, extending beyond the manufacturers of PFAS products. This model represents a step toward understanding how PFAS risks could impact earnings, capital, and risk management strategies for re/insurers operating in Europe.
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