Environmental Insurance Solutions for Florida Brownfield Redevelopment. October 10, 2005

Transcription

1 Environmental Insurance Solutions for Florida Brownfield Redevelopment October 10, 2005

2 Topics of Discussion Introduction The Role of Insurance Broker in the Brownfield Process The Role of Insurance in the Brownfield Process Conclusion

3 The Role of Insurance Broker Work with the Principles to Understand the Deal and Exposures Environmental Site Assessments BSRA Agreement Purchase and Sale Agreement Offer Suggestions and Manage Expectations Develop a Flexible Program that Addresses Exposures Negotiate Insurance Coverage with Various Carriers Service the Program

4 Using Insurance to Address Contaminated Properties in Florida The Issue How do you buy, sell, re-develop a contaminated property? Who Does it Affect? Real Estate Buyers and Sellers Developers Municipalities Lenders Neighbors

5 BSRA Agreements Pros and Cons Pros Gives a release of liability for Cleanup at the Scheduled Property Cons The release is conditional for Regulatory Re-openers and Imminent Hazards The release does not provide any funds for Cleanup Costs in the event of a Regulatory Re-opener or Imminent Hazard The release is not applicable to 3 rd Party Bodily Injury, Property Damage

6 BSRA Release of Liability

7 BSRA Regulatory Re-Opener Provision

8 BSRA Imminent Hazard Re-Opener Provision

9 How Environmental Insurance Fills the Gap Pollution Legal Liability Insurance can cover: 3 rd Party Bodily Injury Property Damage Natural Resource Damage 3 rd Party Diminution in Value Cleanup Costs On-Site and or Off-Site Unknown Known Non-Actionable and Re-openers Microbial Matter Defense Costs

10 Brownfield Scenario BSRA Only BSRA Insurance Cleanup Costs Toxic Tort BSRA Release of Liability

11 Brownfield Scenario BSRA with 3 rd Party Liability Insurance BSRA Insurance Cleanup Costs Toxic Tort Bodily Injury BSRA Release of Liability Property Damage Defense Costs

12 Brownfield Scenario BSRA with 3 rd Party Liability Insurance & Cleanup Cost Insurance BSRA Insurance Cleanup Costs Toxic Tort Re-Opener Imminent Hazard BSRA Release of Liability Bodily Injury Property Damage Defense Costs

13 Remediation Cost Cap Addresses known clean up obligations Covers cost overruns related to Discovery of additional contamination Change in regulatory requirements Unexpected site conditions Increase in base costs Failure of cleanup method Project delays Options for profit share / coinsurance Underwriting engineering review of technical approach and cost estimates Insurance Coverage Self Insured Program limit ($) Attachment point Buffer Estimated cleanup cost $0

14 Blended Insurance Program Addresses known cost (planned remediation expense) and associated unknown risks (potential cost overrun) Blended combination of pre-funding of planned expenses with cost cap insurance Insured draws on policy to fund all or a portion of expected costs Funds in the experience account earn a guaranteed rate of return and the program can be commuted at any time Insurance Coverage Program limit ($) Estimated cleanup cost Cash Deposit of present value by insured Attachment point ($0)

15 Cost Cap vs Blended Program Program limit ($) Program limit ($) Insurance Coverage Attachment point Insurance Coverage Estimated cleanup cost Buffer Estimated cleanup cost Self Insured Cash Deposit of present value by insured Cost Cap $0 Blended Finite Attachment point ($0)

16 Blended Insurance Programs - Benefits Long term financial certainty establishes a firm fixed cost for a highly variable liability Secure, long term, dedicated funding mechanism Can be used to provide financial assurance to regulatory agencies, investors or other parties fully funded reclamation asset Insurance premiums may be tax deductible offering accelerated realization of tax deduction associated from reclamation expenses Stakeholder reassurance - Insured can disclose that they have secured a program from a highly rated insurance company Access to longer term insurance policies

17 Summary - Environmental Insurance Applications for Brownfield Redevelopment Environmental Insurance Augments BSRA Release of Liability Can be Structured to Provide Coverage for Toxic Tort Bodily Injury Property Damage Diminution in Value Natural Resource Damage 3 rd Party Business Interruption Defense Costs Can also be Structured to Provide Coverage for Cleanup Costs Newly Discovered Pre-existing Conditions Imminent Hazard Re-Openers Coverage for Cost Overruns (Cleanup Cost Cap and Blended Program) Provides Certainty for the Developer = Developer Buys Property!

18 Questions? Contact Us Brian N. McBride Senior Vice President Willis Environmental 1 Glenlake Parkway, 11th Floor Atlanta, GA Office: Cell: Fax: brian.mcbride@willis.com