Amwins: New entrants in environmental help drive stable market despite auto pressures

By David Bull

May 20 - (The Insurer) - New entrants to the U.S. environmental insurance market are helping to keep pricing down, with rates for primary casualty lines flat to 10% up, and excess pricing trends in a similar range except when auto coverage is included, according to Amwins.

In its latest update on the segment, the broker characterized the environmental insurance segment as remaining stable, with a broad range of carriers competing for business.

The wholesaler noted that one of the biggest challenges for the environmental insurance market is the current reduction in excess capacity, which it said is largely the result of large auto claims, especially in Texas.

Nuclear auto verdicts in the state have led carriers to scale back their exposure, the intermediary observed.

Carriers that were once willing to put up full $10 million excess limits have cut those in half to $5 million in the past few years.

“More recently, some carriers have opted not to renew accounts altogether to avoid being on the hook for substantial auto claims. Given the increasingly litigious environment in Texas, this trend is unlikely to change in the near future,” said Amwins.

“While the state is not yet considered a judicial hellhole on the level of states like New York or California, it is trending in that direction, with a significant portion of carriers now facing challenges in the state,” the report continued.

The broker added that the cut back in excess capacity in transportation has created pricing challenges for buyers.

In order to maintain the same coverage levels they were previously securing from a single carrier, insureds are now having to buy excess auto liability policies or multiple layered policies, at a higher cost.

“While there have not been significant new market entrants, some notable carriers have pulled back,” said the report.

The intermediary said that retail brokers need to be “especially mindful” of insured fleet controls, notably for accounts where there is excess auto coverage.

“Auto-related losses continue to drive underwriting decisions, and the more controls an insured has in place – including strict fleet safety measures and policies around employee vehicle use – the stronger the case for securing favorable terms,” the report continued.

EMERGING RISKS

Amwins highlighted emerging risks that buyers and sellers of environmental should be aware of.

These include ethylene oxide, microplastics, formaldehyde, Phthalates, Legionella, 1,4-Dioxane and 6PPD-Quinone.

“These risks highlight the evolving nature of environmental exposures and the potential for increased litigation, regulatory action and insurance claims in the years ahead,” it continued.

PFAS exclusion continues to be mandatory across the market, said Amwins, but added that no new exclusions have emerged in recent months.

However, wildfire exclusions are becoming more commonplace for contractors operating in California and other high-risk states, while for older locations, higher deductibles are being seen more widely.

The broker also pointed to increasingly difficult conditions for buying where insureds have older locations, aging infrastructure and outdated systems.

Amwins said that here carriers are tightening policy terms and conditions, leading to higher pricing, stricter underwriting and more limited coverage.

“The surplus lines market is playing a critical role in filling coverage gaps where standard markets have pulled back, particularly for older risks that face financial responsibility requirements,” said the report.

It noted that states are enforcing financial responsibility regulations more strictly, with more inspectors conducting audits, particularly for gas stations, to make sure they carry the required coverage. This in turn is leading to an increased volume of submissions for these risks.

Amwins suggested insureds will need to “remain proactive” when it comes to addressing environmental risks, especially as state-level regulations continue to drive litigation trends.

“The impact of inflation on insureds’ coverage decisions, the potential for further PFAS-related regulatory developments and the evolving role of state funds all bear watching. Businesses should be prepared for heightened scrutiny and increasing claim activity,” the report said.