Risk Evaluation and Management

Risk Evaluation
 
Prior to adopting risk management and transfer products or services, all parties involved in the remediation and redevelopment should evaluate the risks and liabilities that surround them and the project, the viability of the project and risk protection required.

The presentation, Risk Management and Insurance Toolbox, by Charles Fogden, Aon Reed Stenhouse (Oct 2004) provides an overview of:

• Review of the Brownfield Redevelopment Process
• Role of Insurance in Redevelopment Process
• Sources of Environmental Liability
• Who can assert a Claim
• An Insurance Toolbox
• Reading the Appetite of the Marketplace
• Success Stories

Risk Management and Transfer 

Risk management is the act of implementing measures to reduce risk or transferring risk from one party to another. This includes, but is not limited to applying risk management techniques (physical barriers, insurance products and/or risk removal). 

The removal and management of risks in most “positive-value” brownfields sites can be accomplished with the removal of the risk (i.e. complete cleanup or removal of contamination). Where contamination cannot be fully removed and liability exposure remains, either due to technical or cost-prohibitive circumstance, risks can be reduced by the use of physical barriers and environmental insurance. Physical barriers may avoid or prevent the risk of migration of contamination off-site or from exposure pathways to humans and the environment, but will always still present a risk of liability. 

Environmental insurance has carved out a special niche in site remediation and brownfields redevelopment, as it allows the uncertainly surrounding environmental liabilities to be transferred effectively from client to insurance carrier with risk management/transfer products. These products allow developers, owners/managers, lenders, and communities to be protected from liability during and after the cleanup and redevelopment process, encouraging sustainable community development. 

Risk management programs/products are now available to address liability exposure in numerous scenarios and at various costs. A developer, municipality or consultant must balance the costs involved in remediation to and beyond standards with the costs of environmental insurance. 

To alleviate uncertainties of risk and insurance costs, the Municipal Team should:

• Educate all stakeholders about the use of insurance to transfer risk;
• Clarify the types of liability at brownfields sites; and
• Encourage broader and more consistent implementation of financing and underwriting standards