Environmental insurance has moved from niche purchase to near-mainstream in parts of the Canadian market, but many buyers – and some brokers – still misunderstand what they are actually buying, according to SWG’s Brian Ashton (pictured).
Ashton, senior underwriter for security and pollution, said environmental products have been around long enough that obvious high-hazard risks typically already carry some form of cover. Historically, though, it was often treated as discretionary.
“I remember the underwriter who first trained me years ago telling me it usually took about three years of just trying to get the business until the applicants would finally say, ‘OK, I’ll buy environmental coverage,’” he said.
That has shifted. Ashton said environmental issues are now more prominent for many companies, but the real driver is a web of external requirements: standard construction contracts, lenders and landlords.
“For contractors, it would be CCDC requirements,” he said. “Lenders and landlords are requiring them more for the premises' environmental.”
As a result, the pool of insureds has broadened well beyond remediation firms and heavy industry. He now sees everything from metal foundries and fuel distributors to carpenters, small trades and owners of vacant land being pushed into the market.
“You can have your obvious risks, like remediation contractors, or like a metal foundry,” Ashton said. “But you also get a whole assortment of other clients who otherwise wouldn’t have even thought about the coverage.”
He described environmental clientele today as “really just all of them, everybody”, driven as much by counterparties’ demands as by self-assessed risk.
That diversity has exposed gaps in understanding. At the most basic level, Ashton said, newer brokers and underwriters can be unclear about the distinction between contractors pollution liability and premises environmental liability.
“A contractor’s pollution policy doesn’t cover their own premises,” he said. “And of course, premises doesn’t cover off-premises operations.”
While premises policies can respond to pollution that originates on-site and migrates to neighbouring properties, they are not designed to cover contractors’ off-site work. Conversely, a CPL policy will not pick up an on-premises storage tank exposure.
“If you’re a broker and you have a contractor and you think you’re fully covering them with the CPL policy, but it turns out they also have a storage tank on their premises, that storage tank isn’t being properly covered (or covered at all) by a contractor’s pollution policy,” he said.
Hybrid solutions do exist. Ashton said it is possible, though less common, to extend a premises form to pick up off-premises pollution, but the underwriting is more complex and pricing reflects the broader scope.
“What we do is we take a premises policy and add an endorsement to it that extends coverage off premises,” he said. “It can be a little bit more difficult, but it definitely can be done.”
He urged brokers to speak directly with environmental underwriters when structuring programs, rather than assuming one policy will automatically fill every gap.
Misunderstandings also extend to specific features. Crisis management costs – designed to fund PR and communications support after a pollution event – are often built into wordings but rarely used.
“A lot of clients don’t know that they even have the coverage, or they don’t understand it,” Ashton said. “So it’s really underutilized and I think undervalued.”
For brokers, that creates a communication challenge as much as a placement challenge. Ashton said it is not enough to secure competitive terms; intermediaries also need to explain how the different pieces of a client’s environmental program interact, what is included by endorsement and where key exclusions sit. Otherwise, there is a real risk of disappointment when a pollution incident occurs and insureds discover that a loss they assumed was covered falls outside the policy’s scope.
At the wording level, he cited redevelopment and voluntary site investigation exclusions as frequent sources of surprise. These clauses, common in premises policies, typically bar cover for pollution discovered during redevelopment or purely voluntary environmental site assessments.
“It sounds like it’s a really strict exclusion, but I think it kind of makes sense,” he said. “If we allow people to purchase coverage and then they said, now I’m going to go look for pollution on my property, there’d be too many non-fortuitous claims.”
