Category Archives: Environment

Environmental Risk and Responsibility

Despite the increasing attention and resources being dedicated to managing environmental risk, many companies are still at the early stage of this process. The finding comes in a new Economist Intelligence Unit (EIU) survey co-sponsored by ACE, KPMG, SAP and Towers Perrin. It reveals that environmental risk management is frequently managed in an ad hoc fashion, and that there is no clear consensus about who should be responsible for environmental risk. Lack of certainty about the impact of environmental liabilities and the future scope of legislation are the main obstacles to effective environmental risk management. According to the survey, the top three risks cited by respondents for which they face potential environmental liabilities – extreme weather events, the potential impact of climate change over the longer-term and water scarcity – are inherently unpredictable in both timing and scale. “Faced with such a high degree of uncertainty, and the huge challenge of quantifying these threats, it is perhaps unsurprising that environmental risk management remains at a relatively early stage of development,† it notes. What do you think?  

Hanging by a Thread

Another identifiable impact of climate change on the Antarctic environment has been captured in satellite and video images by the British Antarctic Survey (BAS). The footage shows images of a huge chunk of ice breaking away from the Wilkins Ice Shelf on the Antarctic Peninsula. The BAS press release indicates the scientists’ surprise at the speed with which this has happened. “The ice shelf is hanging by a thread – we’ll know in the next few days or weeks what its fate will be,† said Professor David Vaughan of the BAS. Professor Vaughan predicted in 1993 that the northern part of the Wilkins Ice Shelf was likely to be lost within 30 years if climate warming on the Peninsula were to continue at the same rate. According to the BAS, the Antarctica region has experienced unprecedented warming over the last half century. Several ice shelves have retreated in the past 30 years, six of them collapsing completely (Prince Gustav Channel, Larsen Inlet, Larsen A, Larsen B, Wordie, Muller and the Jones Ice Shelf).

Coastal Development Accelerating

The continuing population influx to high risk coastal areas is an ongoing issue for U.S. property insurers, as is the rise in coastal properties. Unfortunately, a new National Oceanic and Atmospheric Administration (NOAA) survey of land use along U.S. coasts indicates that the pace of development in coastal areas is increasing. The survey shows that 53 percent of the new development between 1996 and 2001 occurred along the Southeastern U.S. coast between Texas and North Carolina. The biggest areas of new development include Harris County (Houston), Texas; Palm Beach County, Florida; and Will County (Chicago), Illinois. NOAA also notes that the Mid-Atlantic three-state area of Maryland, Virginia and Delaware, including the District of Columbia, now has development covering over 10 percent of the total land area. An additional area approximating half the size of Washington, D.C., is estimated to be already cleared for development.

Environmental Inaction Costly

Act now or the costs of addressing key environmental issues will increase significantly. That’s the message from the Organization for Economic Cooperation and Development (OECD) in its Environmental Outlook to 2030. The report identifies four priority areas where urgent action is needed: climate change, biodiversity loss, water scarcity and the impacts on human health of pollution and toxic chemicals. It highlights a mix of policies that can address these challenges in a cost-effective way. By 2030, world GDP is projected to nearly double from today’s levels. The OECD analysis shows that it would cost just over 1 percent of that growth to implement policies that can cut key air pollutants by about one third, and contain greenhouse gas emissions to about 12 percent, instead of 37 percent growth under the scenario without new policies. OECD also recommends use of market-based instruments, such as green taxes, efficient water pricing, emissions trading and polluter-pay systems. However, more stringent regulations and standards, such as for transport and building construction, are also needed.

Contaminant Threat to National Parks

Numerous airborne contaminants, including heavy metals and pesticides have been detected at measurable levels in ecosystems at 20 western U.S. and Alaska national parks from the Arctic to the Mexican border. That’s the upshot of a six-year federal study funded primarily by the National Park Service (NPS). Some 70 contaminants were found at detectable levels in snow, water, vegetation, lake sediment and fish, according to the study. The three contaminants of most concern for human and wildlife health were mercury, and the insecticides dieldrin and DDT. The eight core national park areas studied were: Glacier, Mount Rainier, Olympic, Rocky Mountain, Sequoia and Kings Canyon, Denali, Gates of the Arctic, and Noatak. Something to think about as we admire the views on our next visit to one of these national parks.  

Human Toll on Seas

Large areas of the east coast of North America and the Caribbean Sea are among the oceans in the world most heavily affected by human activities. That’s the upshot of a global study from the University of California at Santa Barbara this week. According to its findings, more than 40 percent of the world’s oceans are heavily affected by human activities, such as fishing, climate change and pollution, and few if any areas remain untouched. By overlaying 17 different maps of human activities, researchers came up with a composite map of the toll exacted by humans on the seas. Other ocean areas most severely affected include the North Sea, the South and East China Seas, the Mediterranean Sea, the Red Sea, the Persian Gulf, the Bering Sea, and several regions in the western Pacific. The least affected areas are largely near the poles.

Mind the Gap

Hardly a day goes by without a headline on some environmental issue, whether a catastrophe such as the recent oil spill in San Francisco Bay, or an emerging liability like global warming. While environmental liability is not a new issue, the wide range of environmental problems occurring today underscores that the potential exposures for insurers may be growing. So the latest report from ratings agency A.M. Best on asbestos and environmental exposures makes for interesting reading. It notes that the industry’s unfunded environmental exposure totaled $22 billion at year-end 2006. This is a substantial number and dwarfs the industry’s estimated shortfall of $3 billion for asbestos. Based on A.M. Best’s estimate of $56 billion in ultimate environmental losses, the $22 billion funding gap is significant. A.M. Best’s explanation for the gap is that the industry has been funding its pollution liabilities very slowly based on optimistic assumptions about underlying claim trends. But while annual environmental loss payments have declined, payouts are still significant at $1.1 billion in 2006. Given emerging exposure trends and increasing demand for environmental coverages the question remains whether insurers’ environmental reserves are sufficient.

Top States For Deer/Vehicle Collisions

Cars and deer can be a lethal combination, particularly during deer migration and mating season which generally runs from October through December. A State Farm study of annual deer claims data from 2006 to 2007 and motor vehicle registration counts by state from the Federal Highway Administration, highlights the growing frequency and cost of deer/vehicle collisions. The upshot is that West Virginia is the leading state by frequency. State Farm estimates the chance of a West Virginia vehicle colliding with a deer in the next 12 months at 1 in 57. That’s three times more likely than one estimate of the possibility that a person will be audited by the Internal Revenue Service in 2008 and 5,000 times more likely than the chance that an individual will be struck by lightning in the next year, according to State Farm. Michigan (1 in 86) is second on the list of states where deer/vehicle collisions are most frequent, followed by Wisconsin (1 in 99), Pennsylvania (1 in 100) and Iowa (1 in 109). State Farm’s data also shows that the total number of deer/vehicle collisions in the U.S. has increased 6.3 percent over a year ago. The average property damage cost of these incidents also increased by 3 percent to just under $2,900.  

Wildlife Strike Hazards

Bird hazard may not be the first risk that comes to mind when stepping aboard an aircraft today, but bird strikes (i.e. aircraft collisions with birds and other wildlife) are a major risk exposure for airlines and their insurers. Consider the following: flying is an increasingly popular mode of transportation; air traffic worldwide is increasing and natural habitats around airports tend to be home to wildlife. According to the Federal Aviation Administration (FAA), some 72,526 strikes were reported to civil aircraft in the U.S. from 1990 to 2006. Birds were involved in 97.5 percent of the strikes, terrestrial mammals in 2.2 percent, bats in 0.2 percent, and reptiles in 0.1 percent. The number of strikes annually has quadrupled from 1,743 in 1990 to 7,089 in 2006. Further, the annual cost of wildlife strikes to the U.S. civil aviation industry is estimated at in excess of $603 million and experts say the risk is growing. The Bird Strike Committee annual meeting features a wide variety of presentations on how to mitigate the bird strike hazard. Check out further I.I.I. facts on aviation.  

Mercury Exposure

A late in the day news item spurs this posting on antiques and potential mercury exposure. The Centers for Disease Control and Prevention (CDC) has warned that antique or vintage items such as clocks, barometers, mirrors and lamps, are liable to mercury releases. Apparently the problem arises when seals age and these items are dropped, damaged or moved improperly. The CDC study cites six case reports of antique-related mercury releases in New York state between 2000 and 2006. Although none of these spills resulted in symptoms or acute health effects, the CDC notes that they required remediation to prevent future mercury exposure. The agency says the findings underscore the need for caution when handling antiques containing elemental mercury and the need for proper remediation of spills. We’ve heard of exposure to mercury  from eating fish, but could this  be something to watch? For further info on mercury  check out  the Environmental Protection Agency (EPA) site.