Few areas of insurance are evolving as rapidly – or as urgently – as pollution liability. Environmental regulations are tightening. Climate volatility is growing. And for Marco Andolfatto (pictured), chief underwriting officer at APOLLO Insurance Solutions, that signals a clear imperative: change how the industry underwrites pollution risk.
“I think the issue with this line of business, which is very similar to cyber insurance, is it’s constantly evolving,” Andolfatto said. “Both from the exposure standpoint, but also from the regulatory standpoint.”
The comparison to cyber is no accident. Both coverage lines are driven by external change – legislative, technological, and behavioral. That means the old strategy of reacting to losses, rather than anticipating them, no longer works.
“What the industry needs to do is go from a more reactive approach to a more proactive underwriting approach,” he said. “Using models that are predictive rather than reacting to what’s going on in the real world.”
That’s easier said than done. Predictive underwriting requires more than just faster data – it demands integrated risk modeling that factors in live exposures, new regulations, and ESG commitments. “It requires more dynamic models that look at exposures, different regulatory pressures, and sustainable practices,” Andolfatto said. “And really collaborate with expertise from risk engineers, environmental scientists and legal advisors.”
Many legacy models – still used widely across the industry – simply aren’t equipped for that. “They use outdated information, outdated actuarial tables, static data,” he said. The result, in many cases, is mispriced risk. “We’re not charging way too much or way too little,” he said. “But we need more dynamic pricing to ensure the pricing is appropriate for the exposure.”
Technology is unlocking tools that weren’t practical just a few years ago – from satellite data to AI - powered analysis. “There’s even data from large language models that can help with understanding regulatory updates,” he said.
But integrating those tools requires more than willingness – it requires cultural change. “The insurance company has to allow their underwriters to have these tools,” he said. “But insurance companies are inherently risk averse... a lot of times opening up to new data and tools goes against that very nature.”
Andolfatto warned that inertia has a cost. “There is a greater sense that with this type of coverage, there can be a greater protection for the public space, the common environment,” he said. Still, the product has to make business sense. “Do they see value in it? Does it serve a purpose for them? Can they connect the dots between the risk it’s covering and their operations?”
That’s where underwriting automation and insurtech integration could play a role. “Insurtechs can play a role in taking the underwriting logic and integrating it into different data sets – satellite imagery, EPA records, things like that,” he said.
At APOLLO, the focus has turned to microinsurance: small, digital-first policies aimed at clients that wouldn’t traditionally qualify for environmental coverage. “Environmental insurance is still a product that is generally more accessible to larger risks,” he said. “Technology can bring this type of product to more insureds. It can make underwriting more digitized, streamlined and consistent.”
That consistency could help pollution coverage follow the same path cyber insurance took – evolving from an optional add-on to a standard, embedded product. “There’s no reason why more expanded pollution coverage couldn’t be embedded within core lines,” he said.
Pollution liability, Andolfatto argued, should be next. But the window for change is narrowing. The industry needs to move – not wait. “Ultimately,” he said, “it’s about being proactive versus reactive.”
