London Environmental Rates Flat, Survey Finds

Environmental liability insurance premium levels show signs of bottoming out, but there are no indications rates will go up, according to a survey of the four London Market environmental carriers.

And while premium levels appear to be stabilizing, the coverage being offered has been "significantly enhanced and expanded," the Willis Environmental Index produced by London-based brokerage Willis Group Holdings found.

The quarterly survey conducted by the firm's Financial Executive and Professional Risks (FINEX) division asks participants for their views on the underwriting market over the past three months and their predictions for the next three months.

Based on the survey, Willis said premiums for longer-term, once-off environmental insurance policies covering future claims and regulatory action arising from preexisting contamination had continued to reduce by 20 percent or more over the last six months.

Looking forward, insurers polled by Willis anticipate that premium levels for this type of policy will remain largely static over the next six months.

The survey found opinion split among underwriters concerning the premium trend for shorter-term renewable policies.

According to the brokerage this is due, in part, to the expanding range of low-cost renewable environmental insurance products. Willis reported there was a general consensus among insurers that premiums for these types of policies were also unlikely to reduce further over the next six months.

While most insurers surveyed said environmental insurance premiums would not increase in the foreseeable future, the brokerage found this is being offset by a greater willingness by carriers to offer policy enhancements--for example, lower deductible (excess) levels and higher policy limits for no additional premium.

"This is great news for buyers who look set to continue benefiting from the soft market conditions through the increased availability of coverage enhancements," Willis said.

In a statement, David Barr, Willis environmental program director, said, "Our survey results bear out the stabilization of premium levels which has been evident recently within the environmental insurance market."

He suggested the trend presents "both challenges and opportunities to environmental insurers, as competitive advantage is increasingly likely to be delivered through offering coverage enhancements, rather than solely charging a lower premium."

Among other points in the index report, Willis said there has been increasing interest in environmental insurance in Italy fueled by the country's early adoption of the European Union Environmental Liability Directive.

The report in its North American commentary contained a warning that buyers should beware when considering the purchase of assets of the possibility of successor liability.

The Willis Environmental Index polls non-U.S. insurance companies. It provides buyers of specific lines of coverage with an overview of relevant issues unique to their industry.

The complete London Market Willis Environmental Index is available online at http://www.willis.com/news/Publications/.