Environmental risks are becoming increasingly difficult to manage owing to their growing number and size, as well as emerging contaminants, according to Environmental Risk Managers (ERMI) and CIC Services. This was stated as the two organisations hosted a webinar to explain their newly launched environmental captive insurance programme, EnviroCap. In the webinar, Chris Bunbury, president and CEO of ERMI, highlights that they do not directly sell environmental insurance; instead, it educates clients on their environmental exposures so that they can make an informed decision whether investing in pollution insurance will add value to their business. Bunbury also outlines that the programme clearly states a broad definition of a pollutant (a substance introduced into an environment for a reason other than its intended use or purpose) to establish an easier standard for insurers to understand. Under this wider definition, example coverages include site, contractors, products or transportation pollution, non-owned disposal sites, storage tanks, product recall and emergency response costs. EnviroCap offers two captive programme options depending on whether a firm has contractual requirements to be involved with an A.M. Best A-rated carrier. Both options are designed to address the inadequacy of most businesses’ environmental risk as a result of higher insurance rates and reduced coverage in the commercial insurance market. In the current structure of traditional environmental insurance, insured businesses pay a premium to a carrier in exchange for coverage. In the webinar, Tim Welles, director of business development at CIC Services, explains that EnviroCap is different to a guaranteed cost arrangement because a significant portion of premium paid to the rated fronting carrier is then ceded to the captive in exchange for reinsurance coverage. Both the insured business and the captive are usually owned by the same shareholders, who then benefit from the profits of both structures. The non-rated carrier option follows a captive direct-written structure, whereby the insured business transfers risk directly to the captive in exchange for premiums and receives claims payments. The captive then reinsures risk to the EnviroCap reinsurance pool, which assumes premiums and claims from participating captives and retrocedes unrelated risk. Bunbury concludes the webinar by summarising: “The ERMI environmental captives are custom designed and unique to the company forming and capitalising the captive. EnviroCap allows for policy language that is tailored to the specific needs of the captive insured, thus lowering cost while increasing profits over using traditional insurance.”
