It is possible to transfer both known cost items (such as recognized remediation costs) and the associated unknown risks (such as potential remediation cost overrun) using a combination of pre-funding and conventional cost cap insurance. These blended finite programs are typically combined with a Pollution Liability policy to cover third-party liability claims.

Essentially, insurers will charge a premium to fund the recognized reclamation expenditure with an additional charge to transfer the cost overrun and timing risks. Since they are future costs, the estimated reclamation costs are discounted to an appropriate net present value.

The funded element is charged to an experience account which the insurer invests at a guaranteed rate of return - the aim being to generate sufficient funds to match predicted reclamation costs. The insured then draws on the policy to fund the reclamation obligations. Any funds remaining in the experience account after all reclamation expenses have been covered are typically returned to the insured.

The balance of the experience account can also be returned to the insured at any time via a commutation of the program.If the experience account does not contain sufficient funds to cover reclamation expenses, the overrun is funded by the insurer (up to the policy limit). Limits in these programs are typically set at twice the value of the anticipated expenses.

Our Other Environmental Risk Management programs:

Lender Environmental Site Protection

Environmental Site Protection

Remediation Cost Gap

Contractors Environmental Protection

Environmental Liability Transfer