Remediation Cost Overrun Protection 2.0
Environmental Services Group
Aon Risk Solutions
Early incarnations of remediation cost cap products were eliminated from carrier offerings in late 2009 or early 2010 while the underlying risk of remediation cost overruns and the demand for an insurance solution remained. The previous versions of cost cap insurance offered by several major carriers were tremendously popular but resulted in unfavorable loss experience. Cost caps’ poor loss history coupled with the lowest interest rate environment on record, led to the disappearance of the product from the marketplace. Several environmental markets have determined that with different underwriting methodologies, coverage parameters and interest rates on the rise a new generation of cost cap products, or Cost Cap 2.0, represents an opportunity for clients and carriers alike.
Today the EPA estimates there are over 450,000 active Brownfield projects in the U.S., collectively leveraging some $14 billion in cleanup and redevelopment funding. When dealing with large-scale contamination and remediation issues, stakeholders, including site owners, investors, banks, property developers and contractors, have always been concerned that cleanup costs will exceed estimates primarily for the following four reasons: