Role of insurance in managing environmental risk

Transcription

1 Role of insurance in managing environmental risk IEMA 2007 Phil Crowcroft Partner, ERM

2 Defining environmental risk Risk to health, water, ecology, buildings, crops Balancing risk of doing something with risk of not doing something When we reach the edge of science (which is quite quickly), how should we behave? Apart from gas and asbestos, is there any evidence of harm from contaminants in soil?

3 Whose perception of risk? Can VOCs in soil cause acute myeloid leukaemia in babies? Can we afford to ignore the indications on one site when considering all other sites? Or does anecdotal experience across the UK suggest we are over-reacting? Is contamination a convenient issue for NIMBYism?

4 The Overall Process (Greenleaves II*) Risk assessment the probability of an event occurring the severity of harm or pollution Stakeholder involvement broad involvement of parties concerned with or affected by risk helps define acceptability of risk Risk Management options based on risk assessment take account of likely economic and social impacts deal with residual risk by insurance? *DETR Guidelines for Environmental Risk Assessment and Management

5 Who decides? The final decision on how best to manage environmental risks should, therefore, always be informed by both science and by stakeholder concerns, and will often be a political decision DETR Guidelines for Environmental Risk Assessment and Management - Greenleaves II

6 The Precautionary Principle Where there are threats of serious or irreversible damage, lack of full scientific certainty shall not be used as a reason for postponing cost-effective measures to prevent environmental degradation The Rio Declaration, 1992 So just because we don t have absolute facts, doesn t mean we can t make reasoned judgments

7 Many pitfalls in risk management Action taken to protect one receptor may impact another or cause different effects (physical vs psychological) Beware action which is irreversible (remediation of contamination may destroy habitats) Consider the benefits you forego if you do decide to be precautionary (extra-curricular school trips or couch potatoes?)

8 Informing the decision Risk assessment as a technical tool should inform the decision.but be balanced against other factors Beware risk assessments undertaken to prove that a risk is acceptable Think carefully about what we mean by acceptable Don t confuse bold statements with facts ( the R101 is as safe as a house, at least to the millionth chance )

9 Three forms of risk Technical risk - human health, ecology, controlled waters, buildings etc Economic risk - internal and external budgets, programme costs, capital versus revenue costs Social risk - blight, social deprivation, perceived risk, reputational risk

10 Technical risk Deal with major risks by remediation Deal with progressive medium term risks by management techniques Deal with long term or residual risk by insurance Insure against regulatory action Third party risks Look ahead to insurance in relation to Environmental Liability Directive?

11 Economic risk Risk of budget creep/gallop Cost cap insurance? Programme over-run, leading to cost increases Government funding of LA work - capital cost creep Reputational risk loss of share value, negative view of brand, loss of sales

12 Social risk Blight, and potential to insure against loss of value in property? Social deprivation - ghetto effect, can we get out of here? Perceived risk potential problem, due to be inspected, can t sell property due to uncertainty

13 Risk management Technical solutions Management solutions Financial solutions Insurance solutions

14 Health Two perspectives Industry and Regulators are getting on with it CLEA and the underlying science is caught in the political undergrowth

15 Health applying Model Procedures Most people happy with tiered approach to risk assessment GQRA well used, based on more than one model Existing GACs used widely DQRA used less often disagreement on changes to input parameters Exposure models for different landuses more common Most sites muddle through

16 The Way Forward Defra now considering consultation responses No new guidance before year end No new SGVs until 2008? Who can blame CIEH for publishing interim criteria? Defra says only one number for both Planning and Part 2A Defra asks for evidence on which to base policy Maybe we don t have evidence..

17 Some thoughts for Defra Policy issues: Toxicology needs guinea pigs, and there are no volunteers Modelling should be realistic, not improbable Need to base decisions on a pragmatic balance between limited science and practical experience What is an acceptable level of increased cancer risk? conservative policy is not always good policy

18 In summary Assessing and understanding risk is an established process Remedial solutions too Management and financial solutions also available Insurance then picks up the residual risk Just a lack of confidence in the numbers which support the process

19 More information? Phil Crowcroft, ERM