Federal standards influence state-level standards and become a yardstick against which all industries are measured. Environmental insurance providers must recognize when new standards are higher than what an industry was previously held accountable to. If a company finds itself out of compliance, that increases its risk exposure to third-party claimants.
Take perfluorooctane sulfonic acid (PFOS), for instance: a man-made chemical used in manufacturing – packaging and products – beginning in the 1950s. In recent years, PFOS has been discovered in ground water and drinking water, including in the lake and wells near a small municipal airport in Wisconsin where firefighters trained using foam that contained PFOS, which ran off and contaminated the water. PFOS is currently not regulated at the federal level, but there are initiatives in place to make it so – a change that might incentivize manufacturers of products containing the chemical, as well as industries or businesses that use those products, to obtain pollution coverage.
Environmental insurers, including Argo Environmental, must be aware of policyholders’ hazards and exposures. Mid-size to large manufacturing companies, for example, often have exposures related to air pollution, solvents and paints. Those companies should also have an environmental manager (one of the factors that makes them more attractive to insure) whose job it is to stay up to date on changes in environmental policy and ensure that the company meets the requirements.
As environmental regulations begin to take effect, insurers will be looking more closely at clients’ exposures and tailoring coverage to meet their needs as well as to protect the insurance companies’ risks for liability.
Tax incentives could spur environmental industry investments
The environmental industry tries to be resilient, looking at the long-term benefits of their investments. If incentives offered during one administration have a four- to eight-year shelf life, it often may not be worthwhile for companies to put in the up-front investment just to receive benefits for a limited time.
Alternative energy investments may be the exception. Over the last few decades, we’ve seen an increase in climate awareness, investment in renewables and fossil fuel brands reinventing themselves as energy companies.