Transcript Environmental Insurance (EIL)

CONFERENCE ON THE IMPLEMENTATION OF
COASTAL FACILITIES SEA POLLUTION LIABILITY
INSURANCE IN THE EU AND TURKEY
Session I: Implementation of “Coastal Facilities Sea
Pollution Liability Insurance” in the European Union:
Legislative Framework, Practices in Member
Countries and Conditions for (Re)insurance
Coverage
Dr Marcel Steward:
Managing Director – Environmental Division
Environmental Insurance (EIL)
Overview
• Coverage in the European Environmental Insurance
Market
• Characteristics of the Environmental Insurance Market
• Sudden v Gradual Pollution
• Some Basic Technical Problems
• The Wider Consequences of Getting it WRONG
• Some Aspects of the Current Turkish Legislation
• Summary
WE ARE TRYING TO FIT A
SQUARE PEG IN A ROUND HOLE
INSURANCE
Environmental
Environmental Insurance (EIL)
Environmental Insurance (EIL)
EIL MARKET CHARACTERISTICS
Cover:
• 1st Party On Site Clean-Up
• 3rd Party Bodily Injury and Property Damage
• Legal Defence Cost
• Business Interruption (Optional)
Standard Exclusions:
• 1st Party Employer Liability
• Asbestos
• Radioactive Contamination
Limits of Indemnity:
• USD 20+ million per insurer
Environmental Insurance (EIL)
EIL MARKET CHARACTERISTICS
Trigger:
• Statutory / Enforcement Authority Intervention (typical)
Policy Duration:
• Annual or Multiyear Policies Available:
Historical:
Operational:
Minimum Premiums Apply
NOT CLASSICALLY A REINSURANCE TREATY MARKET
FACULTATIVE INSURANCE AVAILABLE
‘BROKER OF RECORD’ MARKET
1 – 10 years
1 - 3 years
Environmental Insurance (EIL)
EIL MARKET CHARACTERISTICS
BROKER MARKET (Tendency):
•
Technical in its underwriting
•
Non – Standard Policy Wording and Coverage
•
Large volume of ‘non – standard’ information disclosure
•
Usually tailored policy wordings
•
Maximisation of Environmental Insurance Market Resources
Environmental Insurance (EIL)
Environmental Impairment Liability (EIL) Insurance:
• Limited number of underwriters
– Five main underwriters
– Two / Three recent joiners
• Technical Underwriting Market Generally:
–
–
–
–
Environmental Risk Management Requirement of some form
SURVEYS ARE NOT ALWAYS NECESSARY
Some form of ‘Risk’ Specific Information required
Underwriters tend to be technical = few Underwriters (Human
Resource)
– No ‘Rate on Line’ Available for anything other than for SIMPLE
Environmental Risks
Environmental Insurance (EIL)
Environmental Impairment Liability (EIL) Insurance:
Total Pollution Cover compared with Sudden v Gradual Pollution
USA:
Comprehensive Environmental Response,Compensation, and
Liability Act (CERCLA or ‘Superfund’):1980
•
Restriction of exposure of the underwriters
•
NOT an inclusion of cover
•
NOT Defined in a Court of Law
EIL INSURANCE MARKET WRITES: TOTAL POLLUTION COVER
Environmental Insurance (EIL)
SIMPLE CASE
Claim: Sudden 100% √
Gradual 0% X
Sudden
Sea / Water
SAND - permeable
Pollutant
CLAY - impermeable
Environmental Insurance (EIL)
COMPLEX CASE
Claim: Sudden 30% √
Gradual 70% X
Sudden
Gradual
Environmental Insurance (EIL)
COMPLEX CASE
Claim: Sudden 0%
√
Gradual 100% X
Gradual
Environmental Insurance (EIL)
COMPLEX CASE
Claim: Sudden 100% or 30% √
Gradual 0% 0r 70% X
Sudden
Gradual
Environmental Insurance (EIL)
COMPLEX CASE
Claim: Sudden 0%
Gradual 0% or 100%
√
X
Gradual
Environmental Insurance (EIL)
How CLEAN IS CLEAN?
• How Clean was the site BEFORE the Sudden Pollution Event?
• How much Pre-existing Pollution is:
Gradual / Sudden?
• How Much should be cleaned up?
• How Clean should the site be AFTER Clean UP?
WHAT IS THE OVERALL OBJECTIVE?
Environmental Insurance (EIL)
HOW CLEAN IS CLEAN?
Reference
Standard
Clean Ground Particles:
Rocks / Pebbles / Sand
Grains / Soil Particles
Environmental Insurance (EIL)
HOW CLEAN IS CLEAN?
Reference
Standard
Polluted Ground Particles:
Rocks / Pebbles / Sand
Grains / Soil Particles
Environmental Insurance (EIL)
HOW CLEAN IS CLEAN?
Reference
Standard
Actual
Size
Key:
Mag. = Magnification
X 10
Mag.
X 40
Mag.
X 200
Mag.
Environmental Insurance (EIL)
HOW CLEAN IS CLEAN?
?
Reference
Standard
Actual
Size
Key:
Mag. = Magnification
X 10
Mag.
X 40
Mag.
X 200
Mag.
Environmental Insurance (EIL)
HOW CLEAN IS CLEAN?
?
Reference
Standard
Actual
Size
POLLUTER
X 200
Mag.
STATUTOTY /
ENFORCING
AUTHORITY
Environmental Insurance (EIL)
HOW CLEAN IS CLEAN?
?
Reference
Standard
Actual
Size
POLLUTER
Insurer?
X 200
Mag.
STATUTOTY /
ENFORCING
AUTHORITY
Environmental Insurance (EIL)
HOW CLEAN IS CLEAN?
WATER
OIL
WATER + OLIVE OIL
Environmental Insurance (EIL)
HOW CLEAN IS CLEAN?
WATER
LUBRICATING
OIL
WATER +
LUBRICATION
OIL
Environmental Insurance (EIL)
HOW CLEAN IS CLEAN?
WATER
HYDROCHLORIC
ACID
WATER +
HYDROCHLORIC
ACID
Environmental Insurance (EIL)
SO WHAT DIFFERENCE DOES IT
MAKE:
HOW CLEAN IS
CLEAN?
Land Value
USD +20 million
USD – 52 million
ENV. INSURANCE
Available
Claim Paid
NOT Available
Claim Refused
Prison
Guilty
Not Guilty
Bank
Invest
Do Not Invest
Bank
Profit
Loss
Shareholder
Dividend
No Dividend
Seller
Sale
No Sale
Buyer
Good Deal
Rip Off
Environmental Insurance: Turkey
A.1.
Subject Matter of the Insurance
The Insurer hereby agrees to indemnify the insured against the legal liability to be imposed on the
insured in connection with the cleaning up expenses, expenses incurred for
transportation and disposal of the collected waste matters, damages and
losses arising from injury or death of third persons, and damages and
losses suffered by private properties caused by a pollution or danger of
pollution which takes place in the marine authorization areas of Turkey,
which are comprised of internal waters, territorial waters, continental shelf,
and sole economic territory of Turkey, as a result of an event attributable to the shore
facility specified in the insurance policy up to the limits specified in the insurance policy in accordance
with the Law No. 5312 dd. 3.3.2005 on the Principles of Responding in Emergencies to Marine Pollution
Caused by Petrol and Other Harmful Substances, and Compensation of Damages and Losses
Comment:
Cleaning up TO WHAT STANDARD?
Many Env. Insurers do not cover transportation
Many Env. Insurers do not cover pollution at sea or to a limited extent only (?)
Environmental Insurance: Turkey
A.1.
Subject Matter of the Insurance
This insurance policy shall also cover the defenses to be made by
the insured against unfair claims.
Comment:
Most General Insurance Policies ONLY Cover ‘Sudden and Accidental’
Pollution occurrences
The requirement for Environmental Insurance for Sudden and
Accidental Pollution does not preclude the insured’s liability for
‘Gradual and Incremental’ Pollution
Most Pollution Events of Significant Magnitude are GRADUAL in
occurrence
Environmental Insurance: Turkey
A.2.
Definitions
‘Pollution’ means contamination of sea with petroleum or other harmful
substances as a result of an event to the extent it could be harmful for living
resources and marine life, or human health, prevent marine activities and
operations including fishery and other legitimate uses of seas, or could lead to
a change in attributes of sea water, or a deterioration in the ecologic
equilibrium.
QUESTION:
How is this measured?
By who?
Using What Method?
UK Lab. Of Government Chemists:
• Measurement variation by factor of X400
• Difference between + / - USD20 mill
Environmental Insurance: Turkey
A.5.
Occurrences excluded from Coverage
Following claims are hereby excluded from the insurance coverage:
Claims made by the insured for damages and losses;
Comment:
Incomplete protection for the Insured and Additional Insured’s
Environmental Insurance: Turkey
A.6.
Geographical Limits of the Insurance
This insurance shall be applicable within boundaries of the application
areas as well as in marine areas beyond terrestrial waters to be resolved
by the Undersecretariat of Maritime based on opinions of the Ministry of
Environment and Forests, Ministry of Foreign Affairs, and other relevant
public bodies and entities in emergency cases to the extent required to
respond to such emergencies, and diminish damages and losses which
might be caused thereby.
Comment:
Environmental Insurers DO NOT Cover Marine Pollution (?) or only to a
limited extent
THEREFORE – WHO IS?
Is this ‘retained’?
Environmental Insurance: Turkey
B.05.
Multiple Suffering Parties / Beneficiaries
If the aggregate amount of indemnities payable to the suffering parties
/ beneficiaries is in excess of the coverage amount specified in the
insurance contract, then amount of indemnity payable to each of the
suffering parties / beneficiaries shall be reduced based on the ratio of
the coverage amount to the aggregate amount of indemnities payable.
In case of an occurrence where multiple persons suffer from damages
and losses, the Insurer which has paid any amounts to one or more of
the suffering parties / beneficiaries in excess of their actual shares in
the indemnity due to lack of information about other claimers shall be
relived of its liability to other suffering parties / beneficiaries.
Comment:
How Much is NOT ENOUGH to protect / compensate ‘suffering
parties’?
Is YTL 4, 000, 000 / USD 6,000,00 enough?
Environmental Insurance: Turkey
SUMMARY:
The compulsory environmental insurance coverage:
•
Does not provide full protection of the insured against third party
liability
•
Does not protection Additional Insured’s: Former factility owners
e.g. If they are the primary polluter, statututory authorities e.g. If
polluting party is no longer extants / able to pay for other reasons
•
Environmental Insurers do not usually provide cover for marine
pollution events (at sea) – therefore who is coverinig this?
•
USD 6 million: NOT a lot
•
Turkish Compulsory Environmental Insurance: Covers ‘Sudden and
Accidental’ Pollution Events ONLY
Environmental Insurance
Environmental Insurance - Turkey:
SUMMARY:
•
No apparent Clean Up Standard, Standard Analytical Methodology – How
Clean is Clean? How Clean was it before? What is the difference?
What is the objective?
Environmental Insurance
European Environmental Impairment Liability Insurance
General Summary:
•
NOT a TREATY REINSURANCE MARKET
•
FACULTATIVE REINSURANCE AVAILABLE
•
Few Underwriters (Limited Human Resources)
•
Tends to be a ‘Broker’ Market / ‘Broker of Record Letter’
•
•
•
Technical Underwriting
Non-standard information disclosure
Non-standard Policy wordings
Environmental Insurance
European Environmental Impairment Liability Insurance
GENERAL SUMMARY:
•
Upto USD 20+ million Limits of Indemnity available from individual
insurer
•
Multiyear policies available:
Past Pollution Events:
Future Pollution Events:
Coverage - 1 to 10 years
Coverage - 1 to 3 years
•
Cover for POLLUTION EVENTS: No differentiation between ‘Sudden
and Accidental’ and ‘Gradual and Incremental’ Pollution Events
•
Cover for PAST POLLUTION EVENTS available
Environmental Insurance
European Environmental Impairment Liability Insurance
GENERAL SUMMARY:
•
Covers 1st Party Clean Up as a result of Statutory Authority
Intervention or Third Party (Civil) Claims, Legal Defence Costs,
Additional Insured’s, Past & Future Pollution Events and Residual
Liability
•
Does NOT COVER MARINE POLLUTION or TRANSPORTATION IN
TOTAL
Environmental Insurance
Contact Details:
Dr Marcel Steward
Managing Director
Environmental Division
Swinglehurst Limited
30 – 33 Minories
London
EC3N 1DD
Telephone:
Mobile:
Email:
+44 (0)20 7 977 6733
+44 (0)7837 938 447
[email protected]