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Environmental risk management MGA helps retail agents meet complex needs By Phil Zinkewicz Twenty-five years ago, “asbestos abatement” became the cause celebre of environmentalists, regulators and legislators alike. Asbestos abatement contractors, therefore, emerged as a new and much-needed profession. Over the last 25 years, more types of environmental remediation contractors radiated out like a spider’s web, so that today we have mold remediation contractors, pollution site remediation contractors, sheetrock demolishing contractors, and many more, necessitating new insurance products as well as sound risk management techniques. Jefferey Lejfer, founder and president of the Bordertown, New Jersey-based New Day Underwriting Managers, says that his firm has grown around the environmental movement. “Environmental and construction exposures represent our entire book of business,” he says, “and environmental remediation contractors are an important part of all that we do.” Lejfer is quick to point out, however, that, although New Day is a managing general agency working with retail agents, he really considers his firm a “specialty intermediary” working between the carrier and the retail agent on behalf of the agent’s client. “We don’t just sell insurance,” he says. “We have relationships with all the major environmental and construction-related carriers, the same as many other retail agents and wholesale brokers. In addition, New Day has access to ‘wholesale only’ markets that retail agents cannot access. However, New Day’s true strength and value lies in our ability to assess the agent’s client exposures,” Lejfer notes. “We develop risk profiles to assist the insurance buyer in truly identifying environmental risks. We analyze and secure proper and industry-specific coverage rather than purchasing off-the-shelf products,” he explains. “We understand the carriers’ appetites, limitations and coverage capabilities, which reduces the amount of time we have to spend on marketing the program. And we assist in the sales process with client contact and collateral material supporting the agent’s approach. “Overall,” continues Lejfer, “we have built New Day on the simple philosophy of providing a complete risk management program no matter what environmental or construction-related needs the agent’s client may have. We do this all in addition to providing the agent a professional proposal that condenses a large amount of work into a concise format. When agents think of New Day, we want them to think of us as a strategic partner working to provide their clients with the optimal program available rather than just another ‘market access’ intermediary.” Challenge for retailers Jeff Slivka, senior vice president of New Day, describes the challenges facing the typical retail agent with only a few environmental placements a year. “There are close to 25 carriers now offering some type of environmental insurance in the marketplace today,” he says. “Each carrier typically has a minimum of five different programs, some close to 20. That’s more than 200 different potential products available to an agent’s client. The retail agent really doesn’t have time to know and understand what’s available. Think of the various endorsements that are made to those forms and the combinations can be almost infinite. We are in the market every day working with all these carriers on various issues. We are painstakingly familiar with the ‘ins and outs’ of the policy forms, parameters, etc.” Lejfer and Slivka described some of the firm’s case histories. • A $1 billion revenue contractor had a number of significant professional liability claims over the course of six years. As a result, the account had no professional liability carrier alternatives for years. New Day was engaged early in the renewal process. Assessing the claims, the current program and the internal changes made to improve on their loss history, New Day was able to demonstrate to a number of markets that, even though there was still residual exposure, it was minimized and the risk today was a better risk than in previous years. The producing agency provided a broker of record letter to the incumbent carrier authorizing New Day to negotiate renewal terms. In addition, New Day provided two additional options. The end result was that the construction firm was able to double its limits—from $5 million to $10 million—at the same cost as the lower $5 million limit with the incumbent. • New Day was engaged on the renewal of a contractor with combined contractors pollution liability/professional liability coverage. The coverage had been with the incumbent carrier for several years. Based on New Day’s review of the policy and knowledge of the marketplace, “we determined that the best coverage would be afforded by the incumbent since it was offering older endorsements that are not currently available,” Lejfer and Slivka explain. For example, the carrier attached a Superfund liability endorsement. This provides coverage for the named insured in the event that it is identified as a PRP (Potentially Responsible Party) on sites that are added to the National Priorities List or Superfund list after 1997. Considering that there are numerous sites still under investigation, this is valuable coverage that is not duplicated—even by the incumbent carrier—on new business. Although it had only one enhancement, New Day quickly recognized the scope of overall coverage as not being able to be improved. “This saved our partner broker a significant amount of time and effort in negotiating with the incumbent carrier or with other potential markets,” they continue. • The insured, a heavy construction/general contractor, was paying about $55,000 for its contractors pollution liability program. New Day performed a policy review and concluded that it was overpriced. According to Lejfer and Slivka, “We structured a program with another carrier that broadened coverage and reduced the premium by approximately 40%. While our goal was to provide better coverage, we were able to reduce the premium at the same time. It was apparent to us during our review that alternatives existed. With New Day’s knowledge of carriers’ risk appetites, our brokers can be more efficient and effective. “Our philosophy always is to work with the agent as a team to optimize the client’s program, not only to access markets,” says Slivka. “To be part of the ‘team’ means we need to understand the account nearly as well as the agent does.” Expanding market Lejfer and Slivka say that the insurance marketplace for environmental remediation contractors has expanded over the years, but that not all companies mean all things to all contractors. “There are some carriers that will write all coverages for contractors, i.e., pollution liability, general liability, auto and workers compensation. There are two or three who will do that. Other companies will only write some coverages and eliminate others,” Lejfer says. One carrier that provides all coverages for remediation contractors’ exposures is AIG Environmental, according to Slivka. Rough Notes spoke with Michael Giese, vice president of the firm, to elicit his views of the environmental remediation contractors market. “There are several types of exposures usually associated with environmental remediation contractors,” Giese says. “There are job-site liabilities that can develop. There may be an equipment storage area or underground fuel storage facility that needs to be protected. There is a transportation exposure if a contractor is moving certain types of material from one site to another. And there may be potential liability in terms of waste disposal.” Giese says that AIG Environmental has been writing environmental exposures since 1986. “We started with asbestos abatement contractors,” he says, “then branched out until environmental remediation contractors has now become 40% of our business, the remaining 60% being other environmental exposures. Our greatest growth period was between the early 1990s until the year 2000, after which the market became stable. We attribute that, in part, to industry consolidation.” In underwriting environmental remediation contractors, Giese says it is important to examine a company’s loss history and the types of claims that have arisen. Also, he says, AIG Environmental looks at how a company has managed its operations. “Our long history in this market has allowed us to be innovative. For example, ten years ago we developed an occurrence policy for these exposures. It is a market to which we are definitely committed,” Giese says. * For more information: |
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