Analysis Demonstrates Gap Between Risk Management and Environmental Exposures

According to Insurance JournalAon’s Global Risk Management Survey 2009 found that “environmental risk ranked lower as a concern in Europe than any other region – despite the introduction of the EU Environmental Liability Directive (ELD).”

Dr. Simon Johnson, Aon’s environmental director for UK and EMEA, pointed out:

The fact that environmental risk ranked 32nd as a concern in the survey is worrying because risk managers are seemingly lulled into a false sense of security, believing they have no exposure or their pollution strategies are under control.

He added:

Risk managers need to review the ELD and their operations in relation to their insurance programs as there will be gaps. US companies with European subsidiaries are becoming increasingly aware of their potential exposures and in turn we’ve seen a higher take up for environmental liability insurance.

Johnson stated that environmental insurance should be viewed as”preparing for the low frequency, high severity event [to] cover all the risks, damages and losses that could occur.”

On-going operational risk that are not “low frequency, high severity” may not be covered by insurance yet can still represent a significant financial exposure.   The company retains such financial risks.  Risk Managers may not be familiar with either the limitations of insurance coverage or the technical aspects of operations/environmental matters.

Environmental risk assessment processes, such as those used by Elm, are valuable in communicating to Risk Management leaders/departments in their terms, rather than technical EHS jargon.  This can lead to effective integration of risk management and EHS functions and risk reduction.  More information on environmental risk assessments can be found here, here and here.


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