Posted on January 6, 2009 by David Farer
Significant management changes announced this week by AIG Environmental, and further news in the wake of that announcement, may further impact the changing environmental insurance market.
Joe Boren, longtime Chairman and CEO of AIG Environmental, and John O’Brien, President of the Company, have both resigned. On January 5, AIG Commercial Insurance issued a statement that Russ Johnston has been named President and CEO of AIG Environmental, and that Kim Hanna is now Executive VP and COO of the Company.
Over the past ten years, environmental insurance products have been utilized as a key component in many brownfield redevelopment projects and real estate transactions, and have become a common risk-reduction tool in the real estate and manufacturing sectors.
Most recently, the leading players in the environmental insurance market have been AIG Environmental, XL Environmental and Ace, with AIG most active in writing cost-cap and pollution legal liability (“PLL”) policies for real estate transactions and brownfields projects. Zurich has also played an important role in the market, although historically the company has been particularly risk-adverse. Chubb has been writing PLL policies, but not cost-cap policies.
In recent months, however, Zurich has been indicating an enhanced interest in considering the underwriting of projects and transactions that they might previously have declined. Chubb has also expressed an interest in growing its PLL portfolio.
Additionally, in the aftermath of AIG’s statement on the management changes, the Bermuda-based insurer Ironshore, Inc. announced on January 6 that Joe Boren and John O’Brien have joined a newly established Environmental Insurance division of Ironshore in New York City, with Boren as CEO and O’Brien as President.
The impact of AIG’s recent and highly publicized financial woes, and the ensuing reductions in the ratings of AIG’s insurance companies, have generated a good deal of speculation about the future of AIG Environmental and whether the Company would maintain its aggressive underwriting of brownfields projects and real estate deals.
It is yet to be seen whether the financial problems of the parent company and management-level changes at AIG Environmental are leading to an overall change in approach, but with XL and Ace still in the market, Zurich and Chubb expressing a greater interest in underwriting, and Ironshore opening a new environmental division with experienced management, there may be more options available to those seeking such policies, and greater competition on policy terms and pricing.
Tags: News Updates