Risky business

Environment Business looks at an environmental risk screening tool for the financial sector, which has been launched to support environmental insurance underwriting

Environmental risk management is increasing across the financial sector. Awareness of the impacts on property transactions and other financial and business activities is also soaring. Proof of this is reflected by the rapidly growing and developing environmental insurance market.

This increase has led to the launch of a number of products to help address the lack of expertise within many banking institutions, from WSP Environmental's off-the-shelf liability offering to AIG Consultant's new environmental risk screening tool, SiteGuard.

A new risk screening tool

AIG, an environmental consulting and contracting organisation, provides advice and services to a range of developers and property owners, and offers solutions to the redevelopment of brownfield land.

Barclays Bank has appointed AIG to provide environmental risk screening services for loan applications, a result of what consultant David Harman says is an increase in pressure from the banking sector and wider financial community for data on environmental liabilities.

The company worked closely with Barclays to develop a package that Harman says "provides an assessment of potential contaminant sources, pathways and targets". The data is then reviewed and assessed by an experienced environmental consultant, with a qualitative indication of environmental risk provided and recommendations of the next course of action advised.

The development of SiteGuard was co-ordinated with AIG Europe's Environmental impairment liability team and as such provides invaluable data for environmental insurance underwriting purposes.

A solution for insurance underwriters

"The adoption of techniques like this makes is easier for environmental insurance underwriting to take place, and makes it much more cost-effective," Harman says. The product has been designed as a bespoke solution, with the main focus on contaminated land liabilities, although AIG hopes to widen the parameters to increase its scope. "We designed the product in consultation with the client to ensure the report delivery meets their particular requirements," Harman says. He adds: "The main benefits are advantages in terms of a fast turn-around combined with a cost-effective risk screening of either portfolios or single sites."

Harman and fellow consultant Tom Hillier, who was also heavily involved in the development of SiteGuard, now intend to roll SiteGuard out to the financial sector and are already in talks with another major bank. AIG hopes this year it will be able offer the product to clients as a web-based management tool.

"We are currently running this environmental risk screening tool for Prudential and Barclays and have found it is equally practicable on single acquisitions as it is to portfolio reviews," Harman says. Alistair Wright, who heads Barclays' environmental risk management unit, says: "We are delighted we have been able to develop, test and launch this product in such a short time."

However, Harman admits that by its very nature, the product is very UK-focused, due to the information that supports it. AIG would like to develop it into a more European offering if possible.

Overall, the company is positive about SiteGuard's prospects. "We're definitely getting requests from clients looking for this kind of product," Harman says. "This kind of screening for the insurance market seems to be taking root and has been welcomed by the sector."


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