Environmental liability insurance covers companies for financial loss arising from the known or unknown pollution events and contaminated land.
The policy provides long-term protection against identified environmental risks as well as unknown sudden, accidental, gradual and historical pollution liabilities that have not been identified by the parties during an M&A transaction.
Cover under the policy typically includes the following:
- obligation to clean-up and remediate, including the associated costs and expenses
- third-party claims for bodily injury and property damage
- business interruption, including loss of profits and rental income
- legal defence costs
Why use it?
The insured can transfer actual or potential environmental risks to an environmental insurer and thereby ring-fencing any future financial exposure.
Environmental liability insurance can also release potential opportunities for sale or acquisition that might be precluded by a particular identified environmental risk.
The policy can be taken on by or on behalf of either a buyer or a seller in an M&A transaction.
· Provide high-level information on the risk for an initial view from RCA on the insurability and likely pricing range.
· Depending on the complexity and commercial sensitivity RCA may have no-names discussions with select environmental insurers to obtain initial feedback.
· Minimum information required is property location, a high-level description of the potential liability, a survey/Phase 1 report if available and any development or change of use plans.
· Environmental Insurers may provide an NBI based on high-level information on the basis that more detailed information and supporting documents being provided.
· Environmental Insurers provide an NBI based on the information provided or RCA liaises with the insured to provide further information to enable the environmental insurers to issue an NBI.
· RCA liaises with environmental insurers on proposed cover and reports to Insured and advisors with a recommendation.
· An insurer is selected.
· Further information required will be a site report and desktop review as a minimum. More complex, larger or development sites are likely to require a Phase 2 report.
· RCA advises on potential risk-sharing structures and alternative approaches to obtaining the required cover.
· All relevant documents and analysis are provided to the environmental insurer and RCA coordinates the Q&A between the environmental insurer and insured’s risk manager or environmental advisor.
· RCA works with the environmental insurer, insured and insured’s adviser to draft and agree the environmental policy, bespoke to the insured’s risks.
· Final documents any final reports are presented to the environmental insurer and the environmental policy finalised.