In today’s market, a few million dollars of coverage is often not enough to adequately insure a business. For many larger firms involved in complex projects, limits of ten to fifty million are becoming increasingly common. While many agents routinely build these types of programs for their clients’ regular casualty lines, they seldom have the experience to do so for environmental exposures. Although in principal these are similar exercises, there are real issues to be aware of when doing so for an environmental program.
No tower is stronger than its base, and this is true of environmental coverage as well. Far too frequently agents are struggling to fill out limits where the primary layer was constructed incorrectly. An example is when a carrier uses a Contractors Pollution Liability form to provide coverage for an insured’s product. While the policy can be modified to provide some degree of coverage, it is significantly better to simply go to a carrier with a Products Pollution Liability form and have them write the primary properly. This gives cleaner coverage on the primary and makes it easy for excess carriers to step up on a true follow form basis.
Another common issue is using a Site Specific form to cover an insured’s job site. Again, this can work, but only with significant modification of the primary policy. As in the first example, this approach puts excess carriers on notice that something strange is going on, and makes them far less interested in writing the higher limits.
In addition to the structure of coverage, the quality of the carrier offering it is also important. The willingness of an excess carrier to sign on to a program is directly related to their comfort that the primary company will be there to honor their commitments. In today’s insurance market, an “A” Rated primary is crucial. “A” Rated with a size category of ten or better often leads to the best terms from excess carriers.
When the base is built properly, there are many carriers interested in writing higher limits. Again, experience has shown that agents often go with a slightly off primary from a smaller company because the price is much better. Many wholesale brokers would argue that if the base is built correctly, the excess actually becomes less expensive and easier to obtain. In the end, the program is better for the insured, and more cost effective as well—clearly the goal everyone is striving for.
