Climate change and the growing need for environmental impairment liability insurance

Environmental, social and governance risks (ESG) are increasing and insurers are keenly aware of the need to address their impacts. Climate change is widely accepted as one of the key contributors to increasingly severe weather patterns around the globe. From the unusually high temperatures across Europe to the growing number of wildfires and severe storms in the U.S., insurers are seeing an increase in climate-related litigation and other risks. As insurers seek to reduce their carbon footprint and legal and coverage exposures, it will be important for the industry to take a more holistic approach to address these threats.

Steve Tagert is the North American environmental practice leader for Allianz, where he focuses on providing insurance solutions to help companies evaluate and protect against risks related to environmental damage. Tagert has more than 20 years of experience as an underwriter, manager and product specialist in the environmental insurance industry and discusses how the need for environmental impairment liability insurance has changed over the last several years in the latest Insurance Speak podcast.

Tagert shares that the industry has seen an increase in the severity of environmentally-related events and gives the example of the almost eight million gallons of oil that were released following Hurricane Katrina. The oil spill, which is approximately 75% of the size of the release following the Exxon Valdez spill, allowed oil to travel from Louisiana to Alabama. “This put environmental insurance front and center,” he explained.

In its 2022 Global Claims Review, Allianz identifies environmental, social and governance and sustainability issues as a growing area of concern and the source of significant liability exposure. A number of insurers have examined the risks they insure that are detrimental to the environment and have discontinued coverage. “We have to find alternative energy sources and promote sustainability,” said Tagert, “and we have to be more forward-thinking in this area.”

Tagert also addressed the insurance impacts of wildfires and flooding across the U.S., how weather events like the Texas deep freeze from 2021 affected the state’s infrastructure, looks at the evolving science of climate change and highlights some of the issues he’s monitoring.

To hear more about the impact of factors such as greenwashing and how environmental risks affect product liability and construction, listen to the podcast above or subscribe to Insurance Speak on Spotify, Apple Music or Libsyn.

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