August 15, 2013 by Canadian Underwriter
Pricing for environmental insurance in the United States remained generally firm during the first half of 2013, although some markets continued to firm, Marsh reports in a briefing released Wednesday.
Although there were rate increases, these were not seen across the entire market, notes Benchmarking Trends: U.S. Environmental Insurance Rates Remain. The report was prepared by Marsh’s U.S. Environmental Practice in conjunction with Marsh Global Analytics, Benchmarking Center of Excellence.
“Rates for industries that routinely work with hazardous materials or need to clean up contaminated sites, such as manufacturing and chemical, remained competitive,” it says. “Multi-year and long-term policies written prior to 2011 have caused a decrease in the number of renewals in 2012 and 2013. As these policy programs come to a close, renewal and new policies are likely to be reported.”
Marsh notes there was an increase in the demand for environmental insurance across all industries in the U.S. for the first six months of 2013. Generally, insureds continued to seek environmental insurance for mergers, acquisitions, divestitures, brownfield redevelopment and a variety of other business areas.
The average limit levels for pollution legal liability (PLL) insurance generally decreased across all industries over the first half of the year. “This continues a five-year trend of decreasing PLL limits, representing a total drop of more than 25%. Rates remained competitive, and insureds with exceptionally good loss histories and lower hazard exposures generally had higher limits available.”
For those with severe losses, the report notes, rates are expected to increase by as much as 10% throughout 2013.
With regard to short-term site liability policies, Marsh notes these remained competitive. Limits decreased for annual and multi-year policies, continuing a general trend from 2008. Multi-year policies are typically written up to three years, and long-term policies are written up to 10 years.
“Although the market appetite in 2013 is weaker for long-term policies, projects with specific risk exposures, such as significant clean-up, were still available for purchase in 2013,” the report states. “Generally, new business policies were more likely to be written with a shorter term, continuing a trend seen in 2012.”
Other findings from the report include the following: