Insurance Marketplace Realities 2025 Spring Update – Environmental

Despite global economic turbulence, client need and carrier appetites for environmental coverage remain strong in our marketplace.

• Following nearly a year-long period of stability in the U.S. environmental markets, the entry or expansion of at least six markets and the strategic realignment of two others has created significant disruption to underwriting personnel, appetite and authority.
• A likely effect of this expansion will be the addition of capacity to the U.S. market that could contribute to downward pressure on environmental rates that were poised to increase due to increasing cost of claims.
• Layered programs involving multiple carriers for lower-limit programs are gaining appeal with Insureds looking to expand capacity, manage rates and expand carrier relationships.
• While some investors await better economic certainty, the application of environmental insurance has become even more essential for mergers, acquisitions and real estate transactions.

Emerging exposures and opportunities continue to fuel the creation of new environmental products and the reimagined use of some old ones.

• With remediation thresholds for PFAS and other GenX chemicals looming closer, PFAS (per- and polyfluoroalkyl substances) restrictions are now common across most property and casualty lines, although environmental coverage may be secured for companies that can demonstrate de minimus exposure.
• Recent moves made by the EPA have signaled a continued interest in carbon capture and storage/sequestration as carbon generators and consolidators look to benefit from the associated 45-Q tax credits.
• New developments in risk transfer products or combinations of existing products are being applied to new environmental opportunities, such as carbon sequestration (natural resources) and reps and warranties (M&A).
• Ethylene oxide (EtO) continues to emerge as a potential contaminant to watch.

The magnitude and frequency of recent environmental claims have shaped carrier behavior and appetites.

• Rising remediation costs and the potential for multi-coverage claims (environmental, property, general liability) have moved carriers to take a more active role earlier in the claim process to mitigate losses.
• Major losses arising from ancillary environmental coverages, such as transportation and non-owned locations/disposal sites, serve as a reminder of the importance of these coverages.
• Twenty years on, carriers continue to offer affirmative coverage for indoor air quality (IAQ) issues, such as mold and Legionella, but many employ various underwriting tools (class of business, named peril, per door deductibles) to mitigate their exposures.
• Clients are experiencing regulator-driven PFAS claims arising from expanded monitoring beyond a location’s original contaminants of concern — creating possible consequences for both active and closed cleanup sites.

Environmental exposures in the construction industry persist and are expanding.

• An uncertain regulatory environment and economy have resulted in heightened underwriting scrutiny around property transactions or locations intending to expand or modify their operations. Review of future intended use and redevelopment plans for covered locations may be required.
• Excessive siltation and stormwater exposures continue to yield large pollution claims for new construction projects — even clean energy projects (solar and wind) have proven susceptible to these exposures.
• Carriers are expanding the use of shared aggregate limits for monoline site and contractors' pollution as well as contractors' pollution and professional products by combining these two coverages on a single form.
• Redevelopment-related claims arising from preexisting conditions, soil and water management and voluntary site investigations are commonplace.
• PFAS restrictions are now encountered on construction-related programs depending on the contractor’s exposure.