Crystal & Company

Environmental Services Industry:

- By:

Courtesy of Crystal & Company

According to Environmental Business International Inc., the US environmental services industry is a $178.3 billion a year industry representing approximately 115,400 firms which employ 1.2 million individuals. While no industry can expect to totally avoid change, no other industry has seen as much change in such a short period of time.

Environmental consultants and contractors face numerous challenges in today’s competitive and volatile market. To perform and financially survive, one must constantly integrate both technical and financial solutions to deal with the following challenges:

  • Increased competition in the market place;
  • Changes in environmental regulatory standards;
  • Development of market differentiation from other firms;
  • Increased demand from customers for fixed bid or lump sum contracts; and
  • Cash flow management issues

How can a firm overcome these challenges and insure a profitable position for itself in the market place? A solution to these challenges can be found by integrating environmental insurance products with the client’s Remediation proposal.

Historical Problems

Historically in the preparation of a Remediation proposal, the environmental consultant/contractor would make a series of assumptions to clarify various issues and possibilities in order to develop their cost estimates and to provide a legitimate case for the reimbursement of potential cost overruns, if necessary. Typically Remediation proposals are conditioned on the following not occurring:

  • Discovery of greater contamination (greater horizontal or vertical spread) of the known contaminants identified in the remedial action plan (RAP);
  • Discovery of additional contaminants not anticipated in the area of Remediation; or
  • Changes in environmental regulations during or after the implementation of the RAP

When a consultant/contractor consolidates an effective RAP program with an integrated environmental insurance program, the results is almost always 'win – win' for all parties.

Insuring Remediation Risk

In the past environmental insurance programs have typically been considered as a 'necessary evil' and were usually purchased by consultants and contractors as part of their standard lines of coverage (GL, WC, Auto, Pollution, Professional...) But now many environmental service companies have found that a properly designed and implemented Remediation Stop Loss/Cost Cap Policy can provide the following benefits:

  • Market differentiation from other consultants, and could potentially provide higher profit margins;
  • Protection of assets by providing coverage for cost overruns resulting from new or unexpected contamination; and/or
  • Gaining additional risk management services, via environmental risk management and claims services provided by the insurance carriers.

Underwriting Process

Underwriting these integrated insurance programs does come with its challenges and potential pitfalls. It requires a high level of expertise and understanding of both the environmental and regulatory issues associated with the clean up of a contaminated site. In today’s world, the smaller the project (less than $500,00), the more risk that is perceived by the insurance company underwriting the project given their limited tasks and minimal scopes of work. In fact, in the past 2 years many major environmental underwriters have quit writing smaller projects all together. The integration of environmental insurance products into consultants RAP involves a 'partnership' like relationship between the two parties. They must work together to first get comfortable with the closure of the site, then work together over a long period of time, until sites reach final closure.

Broker Driven Solutions

The Environmental Services Group (ESG), is one of only a handful of insurance brokers, nationwide that specialize in facilitating the relationship between these environmental service companies and the insurance carriers. In today’s market place it is more important than ever to have an insurance broker representing you that understands these environmental insurance products. While the number of insurance companies that will write these environmental insurance products has expanded over the past few years, the underwriting and pricing of the coverage has changed dramatically. There are twice as many environmental insurance carriers willing to write Remediation Stop Loss/Cost Cap program today than 5 years ago, but at the same time, the insurance companies are picking and choosing their projects very selectively. As the products and market has matured in the past few years, more losses/claims associated with this type of coverage have resulted in a tighter underwriting process, along with increased pricing. ESG this year has facilitated over 20 environmental transactions. Many have been specifically designed to support a consultants/contractors RAP.

Remediation Utopia

At the end of the day, the environmental consultants or contractors that teams up and integrate an environmental risk transfer and management product into their portfolio of services will find out that they can lower their risk, while potentially increasing their profits at the same time. They can reduce the exposure of financial losses to both themselves and their clients. As the environmental service markets continued to evolve and expand to offer new services, the assessment, transfer and reduction of risk with the use of these environmental insurance products will be an even-bigger component of the industry.

The above article contained information that was taken from exerts of an article published by Anthony W. Gentile, professional geologist and senior underwriter with ECS Underwriting. The entire article along with additional resource information on the latest environmental risk management strategies can be found by visiting ECS Underwriting’s web site at or ESG’s web site at

Customer comments

No comments were found for Environmental Services Industry:. Be the first to comment!