Managing Cross-Border Pollution Risk
Several high-profile incidents over the last few years have kept the spotlight on how businesses are (or aren’t) managing their environmental risks. With continued public pressure on politicians and regulators to hold industry professionals accountable for their actions, the growth of environmental insurance is expected to continue and the number of businesses seeking out strategies to mitigate the costs associated with complex legal actions and damage awards related to their operations will rise.
Environmental insurance can be further complicated by multi-jurisdictional and cross-border operations. Because wind and rain do not respect borders, one country’s pollution can quickly become another country’s environmental problem. Companies with international operations—particularly those in the energy and mining industries—need to consider how different regulatory regimes can impact their coverage.
Kim Neale, National Product Leader, Construction & Environmental Centre of Excellence, Burns & Wilcox Canada, and Bill Gatewood, Corporate Vice President, Burns & Wilcox have identified several best practices brokers should consider when working with clients with cross-border operations.
1. Integrative Approach – Understanding the Risk
The more comfortable an underwriter is with the risk, the better the premium will be. “A cross-border team can review agreements with contractors and sub-contractors and recommend areas where the client could make adjustments in order to potentially benefit from a further premium reduction,” notes Neale. An integrative approach allows for consistency in service, something all clients look for.
Brokers and underwriters must work together during the initial negotiation phase to develop a better understanding of the company’s full exposure. “Working in isolation could result in gaps of coverage,” warns Neale.
2. Identify Process Benefits
“When you are able to consolidate policies, several administrative and process benefits can occur. For example, clients benefit from increased communication and will be more comfortable knowing that if any significant policy changes occur in the U.S., the team will have a clear understanding of any impact for Canada,” says Gatewood. “This may be particularly important if a client needs to move assets from one country to another to complete a project.”
By consolidating policies, companies benefit from an ease of doing business both in terms of negotiations and account servicing.
3. Access to Experts Who Understand International Regulations
By working with environmental and pollution cross-border experts, clients can benefit from policies and coverage that reflects the regulatory environment on both sides of the border. “Having an overall understanding of the risk and how to best cover it in both countries is a major benefit,” says Neale.
Clients look for a broker who can handle all exposures including knowledge of local and international jurisdictions, filing and tax requirements, and market access. Brokers should consider working with a wholesale and underwriting partner who has access to international experts including those in the London market.
Best Practices in Action “Gatewood and I recently collaborated with a Canadian broker to bind a cross-border pollution account for an energy company based in Canada with a U.S. subsidiary,” says Neale. “With several sites on both sides of the border, the company’s business was focused on the construction of intermediary oil and gas facilities as well as pipeline maintenance and industrial cleaning of oil and gas infrastructure.”
The business faced multiple risks and a complex operating and regulatory environment. “Working with the broker our cross-border team was able to identify several gaps in coverage and consolidate multiple policies with a single underwriter.”