Environmental risk managers are taking notice of PFOS, as new studies link this chemical to certain health defects. These reports have been taken into consideration by carriers, resulting in a growing number of insurers and underwriters who are continuing to exclude coverage for it.
“If you were to ask any of my peers, PFOS contamination is on everyone’s mind,” said Michael Padula, head of US environmental at Aspen Insurance Group.
“Toxicology studies are being pursued by more regulators, which has the insurance industry taking notice.”
During an interview at RIMS in Atlanta, Insurance Business caught up with Padula to gain insight on the unique complications of PFOS. He also spoke about the ever-evolving nature of environmental insurance due to changing regulations and new data and how the widespread adoption of EV batteries is creating new forms of risk and business opportunities.
PFOS, or perfluorooctanesulfonic acid, has wide usage in various manufactured commodities due to its appealing water and grease resistant properties.
“It is used in cooking utensils, food wrappers and outdoor textiles. PFOS was everywhere, and a great solution to many common concerns manufacturers were facing,” Padula said.
As more studies began to come out about the potentially caustic side effects of PFOS, which is water soluble and can easily contaminate lakes, rivers, etc., regulators and governing bodies began to take notice, which was also heeded by insurance providers.
Thyroid imbalances, high blood pressure and high cholesterol are a few of the health defects that have been linked to PFOS exposure.
“Recently, the United States Environmental Protection Agency released its proposed drinking water standards, which has a very low detection threshold for PFOS,” Padula said. “This means there may need to be some remedial activity to remove it from waterways in order to mitigate any potential health defects due to unintentional ingestion.”
Businesses will have to be extremely careful and diligent about how they remove the chemical from the water and ensure that their properties are PFOS-free.
However, the product liability side of PFOS exposure will present a myriad of challenges for insureds and insurers alike.
“Since high cholesterol or blood pressure can be linked to an individual’s lifestyle choices, it will be more difficult to differentiate what is strictly related to PFOS,” Padula said.
“With asbestos, that resulted in a very specific condition that could be easily linked back to the chemical, so this will definitely present issues on how far down the line of product liability do we go if PFOS was used in a process or a product previously.”
The environmental sector is constantly in a state of flux as new data or regulations get implemented to thwart ecological harm and stave off the effects of climate change.
“It gets more complex every day, especially as new information becomes available and weather phenomena becomes more erratic,” Padula said. “This keeps us on our toes, and especially underwriters, who need to be really creative.”
Aside from PFOS, another emerging concern is shredded tire fibers making their way into storm water and aquatic species.
“In the West Coast, there’s research being done on how microplastics, especially rubber from tires, are infiltrating the ocean as they break down,” Padula said.
This has caused risk managers to think innovatively about how to provide solutions to new threats while still keeping the economy going.
“No two risks are the same,” Padula said. “In order to really get ahead of things and best prepare an insured, you have to collaborate and bring the right experts to the table to make the best possible decisions.”
“You must also have a healthy trading relationship with a broker, because they bring tremendous value as far as helping explain a lot of the exposures and their experiences in crafting a policy that meets the needs of all parties involved.”
As electric vehicles experience a leap in demand as an alternative to carbon-emitting gasoline models, the risk and opportunities associated with this technology have increased.
“EV batteries are really shaking things up, and we’re going to be seeing a lot more of these vehicles on the road in the near future,” Padula said. “This creates an environmental exposure from the manufacturing of these batteries in facilities and a need for more coverage and thorough risk assessment for these spaces.”
EV batteries also have a finite lifespan, so safe recycling and disposal programs are essential be able to minimize the ecological impact of unsafe handling.
“Carriers are definitely looking into how companies will be able to produce these with the full extent of its lifecycle taken into account,” Padula said. “More facilities will have to be created to properly dismantle these products. We can’t just throw them into landfills because of the toxic components used in their manufacture that can leech into the surrounding environment.”
