from the ground Up

by Jessica Cheam, The Straits Times, Apr 19, 2008

Policies protecting companies from such liabilities gaining popularity despite
new status

ONE design defect was all it took for a manufacturer’s toxic waste to leak into
the water supply of a nearby community.
The firm – faced with legal action by many people affected by the pollution –
had to pay millions of dollars in compensation.
It was, however, fortunate in one respect: A growing awareness of environmental
issues meant it had taken out insurance against such accidents, so its costs
were covered.
The demand for this type of liability insurance is growing despite its
relatively new status in the Asia-Pacific, said environmental risk expert Karl
Russek.
Mr Russek told The Straits Times that heightened awareness of climate change in
the region had led to people demanding that governments address environmental
issues.
With increased regulations, companies now face greater liabilities and are
being held to account for the impact of their operations on the environment.
The cost can be devastating, especially for small and medium-sized enterprises
(SMEs) that do not factor in such expenses, said Mr Russek.
This is why insurance policies protecting companies from liabilities arising
from damages to the environment are being promoted aggressively in Singapore
and elsewhere in the region, said Mr Russek, the senior vice-president of
United States-based insurance group ACE Insurance.
ACE, which has a regional office in Singapore, introduced its environmental
liability policies in the US a decade ago but had only recently brought them to
the Asia-Pacific.
Mr Russek said “several dozen” policies had already been sold in Singapore, and
demand had been growing. Clients range from multinationals to SMEs and are not
contained to heavy industries like petrochemicals.
Increasingly, he added, financial institutions and property developers are also
seeking coverage from environment-related liabilities to protect their
properties.
Some common claims seen in Asia include cleaning up pollution caused by
chemicals released onto rivers and emissions into the air, repairing leaking
underground tanks and compensating people who have sustained injuries from such
incidents.
A medium-sized firm could get coverage starting at $10,000 (S$13,500) a year,
depending on its business and location, according to Mr Russek. The limit for
these policies can range from US$500,000 to US$50 million, depending on the
policy.
“Many firms think they are covered by their general liability, but they often
aren’t. We offer coverage focused on unknown environmental conditions,” he
said.
Another silver lining: Companies with good environmental systems in place enjoy
lower premiums, encouraging companies to take responsibility for their
operations.
“But the main challenge is to educate the business community and make them
understand the full extent of their company’s environmental risks,” said Mr
Russek.