Source: BestWire Services, February 28, 2011
Posted on: http://fpn.advisen.com
The appointment by Beazley plc of an environmental risk underwriter at Lloyd’s reflects what the group expects to be the growth of this sector beyond its core North American market.
“This move is being seen as a natural progression in the development of our global environmental offering,” said Beazley underwriter Nicholas Pearson, who is heading the initiative. “And this enables us to specifically address the clients we insure at Lloyd’s for commercial property and for architects and engineers professional liability risks.”
Worldwide, the environmental insurance market is worth about $2 billion (1.48 billion euros) in annual premiums, with most of that originating in North America, Pearson said. The market is growing by about $1 billion a decade, he added.
This growth will be fueled by an increased awareness of environmental risk, greater availability of insurance products, and growing international demand within an improving economic climate, Pearson said. The wariness of capital to environmental risk will mean that insurance will become an important part of mergers and acquisitions, he added.
Beazley’s Lloyd’s initiative follows the creation a year ago of an environmental underwriting team in Philadelphia.
“The expansion into Lloyd’s is the natural next step in the development of our global environmental offering,” said Adrian Cox, head of Beazley’s specialty lines division, in a statement. “Many of the large clients we insure at Lloyd’s for commercial property and for architects and engineers professional liability risks confront significant environmental exposures, which we can now cover from the Beazley box at Lloyd’s.”
Much of the attention of the new underwriter will be taken by Beazley’s Eclipse product, which covers environmental liability and cleanup. Pearson described it as “our fixed site environmental coverage piece.” A second product covers contractors’ pollution liability. Initial capacity will be $20 million.
Beazley’s sense of the potential of this market derives partly from interest in pollution cover from existing clients, Pearson said. The strategy will be to build out from existing products in such lines as architectural and engineering property.
The use of Lloyd’s will allow Beazley to reach the established environmental insurance markets in the United States and Canada, Pearson said, and provide “the flexibility to respond to the emerging environmental risk issues throughout Europe and the rest of the world.”
“Since the United States and Canada are the most mature markets for environmental coverage, these territories will be our initial focus, with U.K, Europe and the rest of the world being a mid- to long-term focus,” Pearson said.
Beazley, which has existing environmental activities in Atlanta, New York and Philadelphia, spent a good part of 2010, building its team and creating its strategy in the United States. All this has come as underwriting talent across the market has been diluted, he said.
Lloyd’s is important to Beazley, offering an “underwriting culture [that] is a key differentiator,” said Pearson. Beazley, he added, prides itself on its ability to provide technical guidance to brokers.
Pearson said he believes that such major events last year as the Deepwater Horizon oil rig disaster and the toxic sludge spill in Hungary could increase awareness of environmental insurance and risk management.
“We have seen many large commercial organizations re-evaluate the adequacy of their environmental insurance programs,” Pearson said. “And this had led to some increase in demand.”
Beazley expects governments in Europe and North America to become more assertive in enforcing environmental regulations, with a resulting rise in demand for insurance. But higher standards on cleanups, he warned, could make life more difficult for insurers and create new third-party liabilities.
Broker Aon Corp. has warned that British businesses “are dangerously exposed” to the threat of expensive fines under U.K. and European Union environmental pollution laws. A company could even find itself liable for the damage caused by a previous owner of its property, Aon said.
“U.K. businesses are potentially sleepwalking in to a real crisis if they continue to ignore the very real threat that environmental risks pose to their balance sheets,” said Simon Johnson, Aon Risk Solutions’ environmental director for the United Kingdom, Europe, Middle East and Africa, in a statement.