EBA Summer Conference: How Environmental Insurance Completes the Risk Management Toolkit
The Great American Environmental team recently had the opportunity to speak at the Environmental Bankers Association Summer Conference. Eric McCabe and Randy Copenhaver, along with Owen Bowes of Willis Towers Watson, had the opportunity to speak on a panel addressing how environmental insurance is a key component to any lending institution’s risk management toolkit.
With over 150 participants in the session, the panel discussed the necessity of a complete risk management team, potential pollution incidents that may affect lenders, general environmental insurance myths and misconceptions and how critical a knowledgeable environmental insurance broker can be to ensure that a lender is fully protected.
A complete risk management team comprised of many different members with diverse skill sets.
Unfortunately, even when all parties properly perform their jobs, sometimes due diligence is not enough when it comes to protecting a lender. This is when environmental insurance becomes a critical component to mitigating risk.
Common Myths and Misconceptions of Environmental Insurance
“A prudent environmental due diligence plan removes all risk”
Although a comprehensive due diligence plan plays a key role in protecting lenders, it does not remove all potential risks. Environmental insurance has the ability to protect the lender from not only existing pollution conditions, but also new conditions that may arise throughout the duration of the lending period. Additionally, there are newly classified environmental contaminants arising each year that cannot always be tested for during initial site monitoring.
“No meaningful coverage”
While this is a common misconception, environmental insurance protects the lender from both known pollution conditions and those that may be uncovered through additional environmental testing. Additionally, a commercial lender policy can assist in maintaining the property value after default and restoring the property to acceptable conditions after foreclosure.
Pricing and coverage have evolved immensely since the inception of environmental insurance. Coverage is now broader and assessed on a case-by-case basis on many policies rather than implementing full exclusions. Longer terms are being offered, including availability of up to 13-year terms for commercial lender policies to better align with lender notes. Additionally, premiums are now lower even as coverage availability continues to expand.
The presentation concluded with an engaging, live Q&A session where the audience had the opportunity to ask numerous questions on how environmental insurance can assist lenders in completing their risk management toolkit.
At Great American Environmental, we understand the intricacies of environmental exposures and can help protect commercial lenders against experiencing further loss – empowering financial institutions to not only be made whole in the default of a loan should there be a known environmental issue, but it also affords lenders several options to accomplish this.
- Allowing for creative loan negotiations (Brownfield Tax Credits)
- Repaying the principal balance of the insured loan
- Maintaining value of a performing property
- Providing the timely payment of estimated remediation cost
Interested in having one of our subject matter experts speak at your next conference? Contact our team to set up some time to discuss our areas of expertise!