NU Online News Service, June 21, 2:20 p.m. EDT
The dollar amount of environmental-insurance limits is on a downward trend, but that is not because of a lack of demand, according to a report from insurance broker Marsh.
On the contrary, Marsh says the percentage of clients purchasing pollution legal liability (PLL) and contractors pollution liability (CPL) policies has increased—nearly 10 percent more PLL policies were sold in 2011 compared to 2009.
But in its “Marsh Insights: Benchmarking Trends—Environmental Purchasing Trends” report, the broker, a subsidiary of the services firm Marsh & McLennan Companies, says purchasers of environmental-liability policies are purchasing lower limits and paying less than they were just a year ago.
Average limits have trended downward over the past four years, with average limits on PLL declining from $12.7 million in 2008 to $11 million in 2011. For CPL programs, limits went from $9 million in 2008 to $7.4 million in 2011.
Marsh suggests that a major reason for this is that clients are no longer purchasing multi-year policies, opting for one-year policies instead.
Loss experience and claims activity data has also “evolved,” giving insurance brokers and the insured better information on limit requirements “allowing for more appropriately structured programs.”
“Overall, insureds are more carefully considering how they deploy their insurance dollars in response to current economic conditions,” says the report.
Additionally, Marsh points out that there has been increased competition in the marketplace, making it affordable to transfer more risk to an insurance program.
The report notes that deductibles have remained constant for PLL programs at around $350,000, while CPL has dropped from a high of $304,000 in 2008 to $121,000 in 2011.