The Evolving Landscape of Environmental Risk and Insurance


Over recent years, the spotlight on the environmental footprint of organizations has grown considerably, and costs associated with their pollution liability have increased. With a heightened emphasis on sustainable practices, organizations now intertwine environmental considerations with their Environmental, Social, and Governance (ESG) principles, aiming to avert potential legal pitfalls and public backlash. Consequently, we have seen a notable evolution in the environmental insurance marketplace:

  1. Specialized Insurance Programs: Previously, general liability insurance was the norm, often leaving out pollution-related risks. Recognizing the rising tide of environmental concerns, insurers started offering specialized pollution liability insurance, addressing environmental harm, cleanup, and legal repercussions.
  2. Brownfields and Specific Site Risks: Industrial activities often leave scars on the landscape, leading to contaminated sites known as brownfields. Specialized policies emerged for brownfield redevelopment, aiding property owners and developers in managing the intricate web of liabilities linked to rejuvenating tainted lands.
  3. Holistic Coverage for Specific Industries: Companies, particularly those in the chemical or manufacturing sectors, can now integrate their general liability policies with pollution coverage, providing an all-encompassing protective blanket for potential toxic product liabilities. Separately, bespoke product pollution liability can be written to address tough product liability risks.

Environmental Risks Across Industries

Environmental liabilities can vary significantly across industries due to differences in operations, waste generation and potential impacts on the environment. Click below to learn more about various environmental risks across industry sectors:

With rising instances of legionella, mold, and vapor intrusion, damages from climate-driven events — like flooding — further elevate the environmental risks and costs faced by real estate companies. Damages can well exceed $1 million for cleanup costs and additional expenses, such as loss of rental income. Some real estate firms are investing in resiliency strategies and strategically rebalancing portfolios exposed to climate-change risks.

Extreme weather events can wreak havoc on the manufacturing sector, causing millions of dollars in damages from mold contamination and business interruption to facilities.

Manufacturers also run the risk of environmental liabilities and reputational risks associated with their products. To improve their reputations, manufacturers may advertise their products as eco-friendly. However, some of these strategies have backfired with accusations of deceptively marketing environmental claims, or “greenwashing,” when products did not meet the established regulatory criteria. Greenwashing claims are on the rise, and companies should evaluate their risk in this area.

The agriculture sector faces threats like lead or arsenic contamination, especially in drought-stricken areas. Additionally, large Concentrated Animal Feeding Operations (CAFOs) substantially threaten air and water emissions. Many in this sector are deploying alternative renewable energy strategies to cap their overall emissions in the environment and be better stewards.

General contractors face a number of environmental risks, including accidental disturbances of known or unknown contaminants; management of on-site contaminated soil; possible discharge issues associated with dewatering activities; asbestos or lead in building materials; pollutants from run-off at construction sites; water intrusion pathways that create mold or construction defects; and the generation of waste materials or byproducts that need proper handling or disposal. Failure to manage these environmental issues can result in significant legal liabilities.

When trucks overturn or trains derail, the environmental consequences can be a calamity to the public and the environment. A tanker truck hauling flammable liquid is an obvious exposure, but every day there are more inconspicuous exposures from trucks hauling a variety of cargo, including alcohol and toxic substances such as nitric acid. When spills occur, liabilities can escalate if the public is exposed.

Hospitals, clinics, senior care facilities and other healthcare companies face several environmental risks, including hazardous chemical spills and pharmaceutical and medical waste. Inadequate waste disposal practices, improper management of hazardous materials, and aging storage tanks could also lead to pollution. Indoor air quality issues from mold and legionella bacteria are a concern as well. It’s essential for healthcare companies to adopt proper facility management, adhere to regulations, and implement sustainable practices to mitigate these risks.

For organizations in the public sector, environmental liabilities can arise from activities such as pollution, waste disposal, and land management. In addition, public water treatment systems are under stress due to water quality concerns from run-off or discharge of chemicals that enter the systems. These risks can have significant financial and reputational implications.

Environmental liability trends highlight the growing need for eco-friendly practices across industries. With stricter regulations and a more informed public, organizations face mounting potential liabilities. The U.S. environmental insurance trajectory showcases a timely response to these shifts, offering companies a buffer against environmental hazards. Organizations can enhance their ESG performance and demonstrate their commitment to sustainable practices by prioritizing environmental sustainability strategies and addressing potential liabilities.

For additional information about insurance and risk management programs to protect against environmental exposures, contact your USI representative or email us at