March 17th, 2010

Environmental Programs Renewal

Posted at 2:30 PM ET

The very competitive pollution liability and combined general liability/pollution liability segment exhibited insurance rate changes that were in a range from flat to a 15 percent decrease. The competitive market led to more insurers offering coverage for non-owned disposal sites (NODS) on a blanket basis and broadened mold clean-up coverage. The cost cap segment is a smaller market exhibiting signs of hardness not seen in the other environmental segments with primary rate changes ranging from flat to 10 percent increases. Developing issues in the environmental space include Chinese drywall, global warming-related litigations and green house gas effects.

Environmental reinsurance is conducted predominantly on a proportional basis. While premium income is down from weak economic conditions and softening primary rates, reinsurers are generally optimistic about the environmental space, as it is typically seen as less competitive than the traditional casualty marketplace. Although there is variation among reinsurer loss ratios, most environmental business is considered profitable. Ceding commissions vary depending upon the mix of retail and wholesale distribution. However, if primary rates continue to decline into 2010, there will likely be pressure on ceding commissions. Reinsurers are reluctant to support new entrants, but are more likely to consider underwriters with proven track records.

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