An Update on the Cost and Availability of Pollution Insurance
PEMD-94-16: Published: Apr 5, 1994. Publicly Released: May 9, 1994.
Pursuant to a congressional request, GAO provided information on the availability of pollution insurance for hazardous waste facility owners and operators, focusing on the: (1) number of insurance companies that provide pollution liability and closure or postclosure insurance; (2) extent and cost of pollution insurance; (3) cost and availability of pollution insurance to land disposal facilities; and (4) impact on the insurance industry if state cleanup funds are made available to treatment, storage, and disposal (TSD) facilities for pollution cleanup.
GAO found that: (1) although 24 insurance companies offer various forms of pollution liability insurance, two insurance carriers dominate the pollution insurance market; (2) the majority of companies operating TSD facilities have had difficulty in obtaining pollution insurance because insurance carriers are becoming increasingly reluctant to underwrite pollution liability; (3) closure and postclosure insurance is available to TSD facilities only under exceptional circumstances; (4) about one-third of TSD companies use liability insurance to cover accidents and meet financial responsibility requirements; (5) some land disposal facilities use liability insurance to meet gradual coverage requirements; (6) small TSD companies have more difficulty in obtaining insurance than large companies and they often use financial tests to meet responsibility requirements; (7) since 1986, the cost of liability insurance has increased 29 percent and many companies are opting for fronting policies that do not offer true coverage; (8) more than half the states have Environmental Protection Agency-approved state cleanup funds to cover the financial responsibility of underground storage tank owners and operators in the case of pollution damage; (9) about 50 percent of all TSD facilities would use state cleanup funds for cleanup if cleanup funds were available; and (10) insurance companies oppose the use of state funds as an financial mechanism for cleanup, since the use of state funds could result in reduced coverage and higher premiums.