Insurers have long bundled pollution liability into one-size-fits-all environmental policies. But as regulation tightens and ESG expectations grow, that model is losing relevance fast.
“ESG regulations change and have a very big impact and a widening impact on our clients’ regulatory and compliance requirements,” said Christine Collins, head of casualty at HDI Global.
The term "impairment" signals a shift. Unlike short-term pollutants – vapour, smoke, discharge – impairment deals with lasting damage to land or ecosystems. “It implies that the site is degraded in some way, degraded through an environmental condition,” said Collins. That distinction is not just semantic; it reshapes how underwriters assess risk and how companies manage exposure.
Allan Truong (pictured), executive underwriter, national environmental liability and ESG specialist at HDI, pointed out that environmental impairment liability (EIL) is often misunderstood or treated as a catch-all. “EIL is synonymous [with] the full product suite that is environmental insurance,” he said. “There might be some contractors pollution... there might be pollution fixed site liability wrapped up under that.”
Confusion, fragmentation, and insurer exits have left gaps in coverage just as environmental scrutiny intensifies. “We have seen that in the last 10 or 15 years... some insurers are coming off market,” said Truong.
The traditional models of environmental underwriting struggle to account for risks that are evolving, inconsistent, and often difficult to quantify. ESG exposures don’t come with historical loss data. Risk appetite is shifting faster than the models used to assess it.
“Emerging... that’s just not definitive at the point, right?” said Truong. “Because it’s consistently evolving.” That makes early engagement critical.
There’s also the sheer volume of information required for underwriting. Environmental site assessments, legacy contamination, land-use history – none of it fits neatly into a single form.
“We are trying to build that into the underwriting process and just make sure that it doesn’t stall the process as much as we possibly can,” said Collins. “We want to operate with pragmatism and try and develop a solution rather than create obstacles.”
That requires clarity up front. “We want to give transparency in terms of what information is required... and try and be as reasonable as we can,” she said.
The biggest friction point isn't awareness – it's uptake. Collins has seen interest in pollution coverage rise and fall over decades. Despite clear exposures, coverage remains optional in many industries. “People are very aware of the risks, but the uptake has not maybe been as much as has been expected,” she said.
Instead of waiting for regulation to mandate action, some insurers are recalibrating their approach to ESG. “We’ve also seen progressive insurers trying to get ahead of potential risk and liabilities,” said Truong. He pointed to growing demand for solutions that integrate environmental, social, and governance factors – particularly in contracts and lending requirements where evidence of insurance is now a prerequisite.
Communication gaps persist. Many firms still struggle to connect operational ESG goals with the right coverage structure. Collins said part of the solution is rejecting generic products and offering modular options built around specific exposures and operational realities. “We’re shifting the ground away from, like, an off-the-shelf product... [and] looking to provide a solution... based on kind of a holistic approach,” she said.
Insurers still active in the environmental space are eyeing Canada with caution – and opportunity. A resource-heavy economy means mining, energy and infrastructure projects come with unavoidable contamination risk. Regulatory enforcement is becoming more assertive, and that makes the gray areas even harder to navigate.
“We have a lot of natural resource kind of business in our country,” Collins said. “Those types of business certainly have an inherent pollution liability risk.”
The Canadian market has also been impacted by a broader trend: withdrawal. As some carriers exit the category, others are attempting to learn from past failures and avoid repeating them.
Truong pointed to European environmental standards as a contrast, arguing that North America is still playing catch-up. “Oftentimes... the European mindset when it comes to environmental stewardship... is a little bit more progressive,” he said. That philosophical gap has operational consequences, especially as Canadian clients begin to adopt more rigorous ESG frameworks.
Where some see a volatile line of business, others see a necessary correction to outdated risk assumptions. “What we’re seeing... is not only [a] market entry,” said Truong, “but also trying to put towards these innovative [ESG] enhancements.”
