Playing to win in environmental libility

Rough Notes, Apr 2001 by Zinkewicz, Phil

Gulf Insurance brings enthusiasm and expertise to a complex and challenging market

Fifteen years ago, the environmental impairment liability insurance market was in a state of flux. Insurance carriers, having been stung by a surge in unanticipated pollution-related claims from business written during earlier years, began pulling away from pollution exposures, seeking to exclude the coverage from standard commercial general liability policies altogether. The litigation explosion in the pollution area caused carriers to panic.

So great were the losses in the pollution arena that they almost toppled the towers of the venerable Lloyd's of London. Lloyd's, in fact, spent the latter part of the 1980s and most of the 1990s trying to extricate itself from lawsuits filed by disgruntled investors on both sides of the Atlantic who alleged that they were duped into signing on with syndicates where pollution losses were expected to be crippling.

But now we're into the new millennium. Lloyd's has survived the investor lawsuit litigation and is now a new marketplace where corporate capital, rather than individual investor capital, dominates. Moreover, insurance carriers, most of whom for more than a decade shunned the environmental impairment arena, are apparently moving back in.

Gulf is good to go

One example is the Gulf Insurance Group, which is owned by Travelers Insurance and therefore a member of Citigroup. Prior to August of 2000, Gulf had been involved in writing pollution insurance coveragesprimarily for small accounts-through a program administrator based in Denver. Then an opportunity arose that promised to bring Gulf into the category of "major player" in the pollution insurance business.

Here's how the scenario played out. United Capitol Insurance Company had been successfully writing asbestos abatement and contractors liability insurance since 1986, the tail end of the last hard market. By 1996, United Capitol had developed so much expertise in the pollution area and had performed so well that it became attractive to Frontier Insurance Company, a wellknown specialty lines carrier. Frontier then acquired the pollution insurance specialty company.

But Frontier began encountering financial difficulties, not related to United Capitol's environmental business, and needed to divest. Last year, Gulf and Frontier agreed to an arrangement whereby Gulf would purchase Frontier's book of environmental business and bring to Gulf the environmental experts who were responsible for that business. Gulf did not take on any of Frontier's liabilities, only the business and the people.

"This is in no way a start-up operation even though the purchase was only completed in August of 2000," says Steve Zeitman, senior vice president of Gulf Insurance Group. "We were a natural fit with Gulf, which is recognized as one of the foremost specialty carriers. Most of us were with United Capitol dating back to 1986, so we've brought on years of experience in the environmental area. We have a definite track record."

And, adds Tom Owen, vice president of the environmental division in charge of day-to-day operations: "Gulf can now offer a broad range of environmental products to the smallest exposures as well as the Fortune 500 companies."

Strength and solidity

Zeitman and Owen say that the environmental division at Gulf can only benefit from the company's established ties with Travelers and Citigroup. Gulf traces its origins back to 1940, when it was then called the Washington Fire & Marine Insurance Company. The name was changed to Gulf Insurance Company in 1968. It wasn't until 1987, however, that Gulf really moved into the specialty lines arena, providing directors and officers liability, errors and omissions,

professional liability, fidelity and surety, entertainment and sports coverages, and other specialty risk products and services.

In 1991, A.M. Best rated Gulf Insurance Group A (superior), and the company retains that rating today. In 1996 Standard & Poor's awarded Gulf an AA (excellent) rating on claims-paying ability, which is also retained today. In 1993 Gulf, through a merger between Primerica and Travelers, became a wholly owned subsidiary of Travelers. In 1998, when Travelers merged with Citicorp and created Citigroup, Gulf became a member of one of the largest financial institutions in the world.

Broad risk appetite

"We offer a broad range of environmental products and programs for virtually all risk classes," says Zeitman. "We offer occurrence and claims-made commercial general liability, contractors pollution liability, asbestos and lead abatement liability, professional liability, claims-made, with pollution for all classes of engineers and consultants, transportation pollution liability, and umbrella coverages. We will consider all industry groups--environmental and remediation contractors, wetlands restoration, environmental companies such as consultants, engineers and laboratories, hospitals, real estate firms, storage tanks, property transfer, and more," he says.