Environmental Insurance

Environmental Insurance policies provide cover to offset financial loss arising from historic, ongoing or future liabilities in relation to specific known and unknown pollution events and contaminated land risks.

Environmental Insurance insures the actual property or activity itself rather than the warranty or indemnity that might be given in a transaction. On a transaction where warranty and indemnity (W&I) Insurance is being used, it is likely that environmental issues / pollution / contamination etc. will be excluded under the policy and so we might look to Environmental Insurance to bridge the gap. Note that the liability here is nothing to do with the transaction itself – the insurable risk lies in the property itself.

Under an Environmental Insurance policy, the policyholder can claim for the damage caused by the environmental issue i.e. the clean-up costs but they can also claim for loss of business of not being able to operate on that site. The insurer will analyse the risk of the chance of there being pollution at the property and the damage it could cause over a 10 year period.

Process

The BMS Private Equity, Mergers & Acquisitions and Tax team will work with you to ensure that the Environmental Insurance process works as efficiently as possible, either on a standalone basis or if required as part of the M&A transaction timeline alongside W&I Insurance to ensure the most effective solution is placed.

Environmental Insurance policies can be put in place quickly and efficiently due to the nature of the underlying risk and the expertise in the market.

If environmental due diligence is available then the insurers will want to see these reports
We can provide a desktop quote providing a high level view of coverage available for the type of risk
We will collate all publically available information relating to the property to share with the insurers
Insurers may require an interview with the due diligence consultants on more complex issues
Full quotes from the market can be obtained in under a week
An Environmental Insurance policy can be finalised in short order

Premium

The premium is rated based on the risk profile of the property or site involved. There are various factors which will affect this rate such as the nature and jurisdiction of the property, the size of the policy limit being purchased and the extent of the contamination. These variables will be discussed at the outset of the enquiry and the one-off premium will be payable once the policy has incepted. An Environmental Insurance policy will usually last for 10 years from inception.

Benefits

If a seller initiated W&I insurance process, then early engagement to obtain Environmental Insurance quotes will allow certain environmental issues to be ring-fenced and dealt with off the deal table which allows for smoother negotiations and greater transparency with the buyer
Insurers with excellent security ratings can provide recourse in the event of contamination thereby mitigating the risk profile of the property
Environmental Insurance policies are available for properties all over the world