The International Underwriting Association has issued a warning over the costs and profile relating to environmental liabilities, for which it says general liability policies provide extremely limited cover.

To address the issues, the association’s Non-Marine Environmental Committee has developed A Practical Buyer’s Guide to Environmental Risk, which provides a brief introduction to statutory responsibilities and legislation, addresses insurance coverage questions, and also provides detailed claims examples. A three-step approach to purchasing Environmental Impairment Liability Insurance is recommended and options for multinational programmes are explained.

The guide highlights a number of key limitations of non-specialist policies and demonstrates the breadth of coverage available for environmental risks in the environmental impairment liability market. For example, general policies typically only cover pollution that is sudden and unexpected, occurring at a specific time and do not cater for instances such as gradual leaks and seepage from cracked pipes.

Another coverage issue is often found in remediation measures. General polices may only support the first on-site response to an incident, whereas modern regulations often require much more extensive compensatory actions.

Tom Hughes, senior market services executive at the IUA, said: “The UK environmental liability market began offering insurance solutions for pollution over 25 years ago, largely in response to various merger and acquisition deals. The aim was to transfer potential legacy liabilities from one owner of a site or business to another.

“Today the sector has evolved into a competitive arena, offering a suite of sophisticated insurance solutions for increasingly complex liabilities. Specialist policies will effectively respond to the broadest range of pollutants and pollution events.”

Copies of the guide are available on the IUA's website at www.iua.co.uk/eil

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