PC360 speaks with Bill Pritchard, president of Beacon Hill Associates, a wholesale broker specializing exclusively in environmental-insurance solutions for commercial insureds.
PC360: Beacon Hill grew 23 percent last year and 12.5 percent the year before. What accounts for this sort of impressive expansion in a still rather stagnant economy?
Pritchard: We have grown a lot in a lousy economy, and it doesn’t mean we’re extra special. There are just a whole lot of Environmental exposures—and there always have been—but contractors that in the past had decided not to worry about them are being pushed from above, their clients, to get coverage now.
And what agents really need to understand is that this growing demand isn’t coming from the traditional buyers of this type of insurance—waste-treatment plants, landfills, recyclers. It’s coming from that construction contractor who needs Environmental for a road job or the electrical contractor doing work on a cell tower. Agents need to look at their book of business and talk to their standard contractors—there are a lot of opportunities.
PC360: What are some of the emerging Environmental risks?
Pritchard: Since mold and silica, there really have been no new, hot-button, doom-and-gloom Environmental coverage issues. In fact, the air has really gone out of the whole mold issue. We hear a little talk about the risks of nanotechnology. That’s an issue that covers so many areas of insurance; Environmental is just one piece of the challenge. Going forward, I could see that becoming a bigger concern.
We see some interesting claims come from the creative recycling of hazardous materials—but those have always been problems and always will be. In the early 1990s, an insured took old tires to build fences in fields and planted vines over them so you couldn’t tell it wasn’t a stone wall. They were concerned then about leaching of the tires into the soil. The recycling of any product creates interesting questions of what it will be in the end.
PC360: What are the overall capacity trends within environmental right now?
Pritchard: There is more capacity today than one year ago—and this is a good trend because we’re seeing a need for much higher limits from insureds. Until recently, very rarely did a middle-market insured with a need for mainstream Environmental coverage need more than $10 million or $15 million. Now we’re frequently being asked for $25 million or $50 million.
PC360: What factors account for this need for twice as much coverage—or even more?
Pritchard: It’s being contractually driven by dealmakers at the top—lenders, buyers and others are demanding $25 million of pollution coverage instead of $10 million to do a transaction. They are trying to make sure they are not picking up any unknown problems. It’s led to a huge influx of opportunities.
PC360: And what’s the story on the pricing front?
Pritchard: What we think of as the quality, solid carriers are looking to get modest rate increases on Environmental insurance: from 3 to 7 percent. But other carriers are still undercutting prices trying to put premium on the book.
For our environmental accounts—asbestos contractors, landfill operators, emergency-response teams—we also work on their General Liability, Commercial Auto and Workers’ Compensation—and those classes of business are trending up faster than the others—we’re seeing pretty consistent rate increases in those classes.
PC360: What are top-of-mind concerns right now with buyers of environmental insurance?
Pritchard: Insureds are concerned with buying from the right company. We’re seeing a lot more interest in who the carrier is, its background, its commitment to environmental insurance and its financial stability. The AM Best rating has always been important—but now it’s even more so. And there’s a much greater focus by buyers on the structure of their coverage and its effectiveness—price is a secondary characteristic. There’s a big trend toward making sure the program and product are what they want instead of chasing a price that’s a little lower.
PC360: And what are carriers focusing on?
Pritchard: We’re definitely seeing a growth in the combined-form approach to their product offerings: like, for a manufacturer, putting General Liability and Site Pollution together on a form and sharing a limit. It’s a more efficient way to provide the coverage and a more appealing way to package it.
Also, carriers are really trying to understand the evolving nature of the insured’s business and making sure the coverage matches up to what they’re doing. These insureds are nimble entrepreneurs; for example, a contractor who might have generally been doing asbestos and lead and mold abatement is now doing a much greater percentage of demolition work. The exposures are always changing with small to mid accounts; they often enter into completely different fields which can make for interesting conversation at renewal time.
PC360: What are Beacon Hill’s chief points of competitive advantage within the environmental space?
Pritchard: We bring to the table a lot of experience. We’ve been in this segment for 22 years; all we’ve done is Environmental and Energy, and we write a fair amount. We have a very broad product knowledge: We know all the forms of the carriers that write this business and can discuss with agents the pros and cons of different forms. We have exceptional market access; the underwriters we use are going to take a good look at any of our submissions. For those agents who may never have worked with an Environmental risk, we can help them understand it and the pitfalls their clients may have down the road.