Environmental Risk/Insurance Management

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Risk management, whether in conjunction with the placement of environmental insurance or not, is often key to the completion of property transfers and other activities.

Premier's risk management staff has assisted clients in managing the risk associated with property ownership, property transfer, and merger and acquisition activities. These projects have included providing assistance in the bidding of insurance coverage, managing the selection of insurance brokers, and negotiating coverage and price. In addition, Premier has assisted clients in evaluating the need for insurance and to determine whether self-insurance or other risk management techniques are more cost effective.

The typical insurance management project for Premier includes the development of a Risk Profile for the property. This document is then provided to the transferor's insurance broker to obtain the most appropriate and cost-effective environmental insurance coverage. Development of this document involves the identification of cause-and-effect scenarios and the implementation of a detailed risk-ranking system. The cause-and-effect identification task is counter-balanced with the identification and description of loss-prevention and loss-control techniques that could be implemented by the transferor. A proprietary risk-ranking system is then implemented to summarize the frequency and severity of a potential environmental loss.

Theses efforts typically result in a property owner being able to satisfy its lender's requirement that future environmental liabilities are controlled by a reliable risk-financing technique, which in turn makes the property more attractive to potential purchasers. This allows the property owner to manage its environmental exposure while retaining a property value much closer to market value for its former industrial property.

Risk Management Staff

David Wade, P.Geo., FRM, Senior Vice-President, Environmental Risk Manager

Expertise: risk management programs, captive liability risk transfer, risk profiling, insurance underwriting surveys, insurance claims support and expert testimony, soil and groundwater remediation design, implementation and site closure, regulatory agency negotiation and strategic planning, facility decommissioning, permit acquisition, mould assessment and abatement.

David Wade is Senior Vice President responsible for Premier's Canadian Operations located near Toronto, Ontario. David is one of Canada's leading environmental risk managers who has developed environmental liability risk transfer programs using unique insurance solutions in the captive and commercial markets throughout the World. He is a Professional Geoscientist licensed in Ontario, Quebec and British Columbia, has a CRM Diploma, holds a FRM with the Global Risk Management Institute and is a graduate of the University of Waterloo in the field of Geomorphology. David has been undertaking environmental site assessments and remediation for more than 18 years and routinely provides expert testimony in support of insurance claims. He is "closure" oriented, bringing strong management and cost effective technical solutions to the aid of clients with difficult environmental liabilities that have been previously unable to obtain site closure.

Risk Management Case Studies

Developing an Environmental Insurance Program for a Former Industrial Manufacturing Facility

Situation

A former industrial manufacturing facility in the Midwestern United States had been converted to office and warehouse space. The owner of the property, in anticipation of the sale of the facility, requested a site-wide evaluation of the previous investigations, design and implementation of additional studies to fill data gaps and structure a request for a Pollution Liability insurance policy to address unknown and undiscovered releases and facilitate the property transaction.

Solution

Premier was retained by the owner of the facility to evaluate previous investigations, conduct an agency file review and design/implement the additional data collection. Of particular concern was the potential presence of plating and degreasing chemicals in the soil beneath the building. To avoid the cost and complexity of investigations within and beneath an existing building, Premier developed a groundwater investigation program that demonstrated that no significant sources existed beneath the building. With that data set in hand, Premier prepared a comprehensive report of the investigation of the property designed to respond to the specific needs and requirements of purchasers and environmental insurance underwriters.

Results

With the exception of limited agency correspondence, the only documentation required by the underwriters was the Premier report. The owner of the property was able to bind a 10-year, $10,000,000 pollution liability policy for a premium of less than $100,000. This policy was transferable to the purchaser and covered unknown and undiscovered on-site and off-site releases, including third-party defense costs.

Insurance for the Transfer of a Privately Held Brownfield Site to Public Agency

Situation

A former paper mill on the eastern seaboard was transferred to the Local Port Authority for industrial redevelopment. The land had been used for wood processing and paper manufacturing for more than 100 years. As a result, many environmental quality issues involving complex soil, groundwater, surface water and tidal sediment had to be resolved to the satisfaction of the State and Local Port Authorities. The Local Port Authority also desired to attract potential developers to the property by offering the security of an environmental impairment liability insurance policy in place on the property to protect against undiscovered contamination.

Solution

Premier developed a Risk Profile of the property that was used by the transferor's insurance broker to obtain the most appropriate and cost effective environmental insurance coverage for the subject property. Development of this document involved the identification of cause-and-effect scenarios and the implementation of a detailed risk-ranking system. The cause-and-effect identification task was counter-balanced with the identification and description of loss-prevention and loss-control techniques that were to be implemented by the transferor. A proprietary risk-ranking system was then implemented to summarize the frequency and severity of potential environmental loss.

Result

The Local Port Authority was able to satisfy its lenders that future environmental liabilities were retained by a reliable risk-financing technique. This requirement made the property more attractive to potential developers. The transferor was able to financially cap its environmental exposure and retain a value much closer to market value for its former industrial property.