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Environmental insurers are connecting the dots between hazardous material releases and severe weather events to improve their risk calculations.
Since existing data is scarce and anecdotal, those insurers are hoping to influence the broader industry to take a closer look at environmental damage by piecing together a database for weather-related environmental claims.
“Underwriters are becoming a little more sensitive to these weather-related incidents,” said Susan Doering, client advocate and senior vice president at risk management firm Willis Towers Watson. Doering and a panel of environment and risk professionals spoke at an RTM Communications, Inc. brownfields conference session in Philadelphia April 13.
In general, Doering said, insurance companies look at hazardous material releases as property damage, not necessarily environmental damage. Insurers may not have any records of what triggered that release.
“If we can get comprehensive data from insurance companies about their losses, we would do a much better job,” Doering said.
Richard Sheldon Jr., head of environmental brokering in North America at Willis Towers Watson, said analysts are working on linking losses to their causes.
“Historically, it’s just not something that we did as a market,” he said. “I’m sure there’s a ton of great information out there if we could go back and fill in the blanks.”
A 2012 study led by Hacettepe University in Turkey analyzed the number of hazardous material releases reported to the U.S. Coast Guard’s National Response Center, which collects information on any oil spill, chemical release or maritime security incident in the U.S.
The study found that natural disasters caused about 16,600 hazardous material releases during that time, amounting to about 3 percent of reported hazardous material releases.
Some of the most commonly released chemicals were chlorinated biphenyls, nitrogen oxides and benzene.
James Done, project scientist at the National Center for Atmospheric Research, said the number of hurricanes will decrease, but they will be stronger.
“The hurricanes that do come along, they’ll be more intense, presumably with impacts on the potential for releases,” Done said.
Instead of relying on the Saffir-Simpson scale, which assigns a hurricane a category based on its sustained wind speed, Done is developing a “Cyclone Damage Potential” index that considers how quickly a storm is moving, the storm’s size and its intensity.
He said researchers also could consider developing an index of release potential, which would consider flooding rains, potential storm surge and winds in a calculation of hazard material release risk.
But weather events don’t have to be catastrophic to cause hazardous material releases.
“They’re expensive, and they do impact the viability of businesses,” Doering said.
Copyright © 2017 The Bureau of National Affairs, Inc. All Rights Reserved.
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