2016 was a tumultuous year for the Environmental Insurance market. The unexpected exit of AIG, one of the most significant carriers by market share and capability, was followed by the emergence of new carriers and little, if any, impact on rates. Moving non renewed coverage has been relatively easy for simple risks and extremely challenging for those that are more complex in nature. Carriers have been eager to take on the more vanilla risk profiles whereas those with more legacy liability or potential for catastrophic loss have resulted in dramatic reductions in coverage and/or dramatic increases in premiums. High-profile events such as the Flint, Michigan water crisis, pipeline leaks and even protests, highlight the environmental risks we face as well as the concerns of citizens. Fast forward to the end of the year, and the US elected a critic of climate change and the Environmental Protection Agency. The Trump administration’s objectives with regard to environmental regulations have been unclear at best. However, any cut backs in EPA enforcement or reductions in regulatory standards at the Federal level will potentially be offset at the state level. California is a state that routinely adopts more stringent standards than those set by the EPA, and is one of the most productive economies in the world, demonstrating that businesses can thrive despite progressive environmental ideology guiding the formation of regulations at the state level.
While we can’t predict how the aforementioned changes will impact the market in 2017, we expect to see healthy competition around basic environmental risks and contraction of appetite or deployment of limits for those with more complexity. Sweeping changes by the Trump administration might not be achieved as easily as anticipated, so it is impossible to forecast what changes will be made and how they will influence markets or the purchasing behavior of our clients.