The environmental insurance marketplace has expanded over the last five years, resulting in greater availability of environmental insurance offerings and broader coverage. But one environmental insurance product that is no longer being offered by any of the primary environmental insurers is the stop loss or cost cap. Cost cap was designed to respond to cost overruns at sites requiring cleanup of known pollutants.

In September, Zurich followed Chartis, ACE, and XL in exiting this product line, citing unacceptable loss ratios. These carriers will likely remain out of the market well into 2012 and have said they may consider re-entry in the future as they reassess the product and their ability to underwrite in a sustainable manner.

Marsh is in continued discussions with the broader insurance marketplace about solutions to meet these important needs. For now, there are a number of other risk management alternatives that may be applicable depending on specific needs on insureds, including:

• self-insurance of known conditions in conjunction with pollution legal liability insurance (PLL), which can be used to address unknown pre-existing conditions, de minimis known conditions, regulatory reopeners, and counter-party credit risk;
• fronted insurance, where evidence of insurance is the primary driver;
• assumption of known environmental risks by a liability buyout company, paired with PLL excess of indemnity coverage to back up the liability buyout company’s obligation; and
• single entity captives for multi-risk, programmatic approaches.

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