Cutting-edge Predictive Modeling to Measure Environmental Risk
A new proprietary and game-changing innovation called Cost Volatility Analysis (CVA) is revolutionizing environmental risk analysis
In the new era of rigorous risk analysis and due diligence that emerged following the 2008 financial shock, environmental liability and risk are no longer footnotes. Not handling and accounting for environmental exposure properly is killing deals, frustrating mergers and paralyzing forward progress in the public and private sector alike.
Environmental liability and risk are things you cannot avoid and cannot run away from. You can, however, protect yourself and plan for an efficient and sustainable path of forward progress with environmental insurance products to mitigate risk and cover your costs for cleanup, bodily injury, fines and penalties, natural resource damages, property damage, defense expenses and business interruption.
The question with any insurance is always ‘how much protection is enough’, but now JLT Specialty USA (JLT) has developed a predictive modeling analysis to determine the potential magnitude of an environmental loss at a particular site or across an entire organization and make recommendations for the most efficient risk management or risk transfer program.
There’s never been an analytical tool like this available to the environmental liability market.
JLT’s breakthrough Cost and Volatility Analysis (CVA) delineates a particular company’s exposure to environmental losses by relating to real operations rather than industry-wide benchmarks. The model can be custom-tailored to determine various risk factors, which are validated through claims analysis and expert review. Then JLT models exposure by generating thousands of simulations over a multi-year period and providing a Net Present Value (NPV) view of the results. The multi-year risk horizon gives JLT the ability to adjust risk factors over time and anticipate variations in risk exposures.
Managing your risk begins by quantifying environmental exposures to understand what can happen on-site, off-site, during transport, or by a third party. JLT’s unique approach to quantifying environmental risk takes the “what can happen?” into account and then maps out the types of costs that could occur as a result.
The CVA platform allows for the comparison of different insurance programs to determine which is superior on an average cost basis and protecting against volatile events. In the graphic below that shows the results of three environmental programs analyzed, environmental insurance Program 2 results in the lowest average cost and lowest volatility for an extreme 1 in 100 year event.
By evaluating these programs against two key criteria–the ability to control costs and the ability to limit the volatility of extreme events–JLT can recommend the program option that is most efficient for you.
JLT’s new Cost and Volatility Analysis offers two levels of analysis:
Advanced Analytics is a highly customized approach in which JLT takes a comprehensive look at your risk profile and builds a unique model to quantify your risk with risk parameters based on your specific characteristics. This model includes specific risk scenarios that will be reviewed by both JLT’s Environmental Practice and its Analytics & Consulting Practice. JLT provides detailed results, including attribution analysis, if desired, of the various cost types that can occur. This level of analysis gives you a complete look at your insurance needs and other specific advice regarding the most efficient structure for your organization–including the option to incorporate risk tolerance considerations into the decision-making process.
Broker Analytics Model
Broker Analytics is a less detailed version of the Advanced Analytics approach, but still aims to specify your risk profile through a series of identified risk factors, such as industry type, company revenue, number of facilities, and facility locations, types, and ages. JLT’s Broker Analytics level of analysis is provided free of charge and is intended to quickly offer directional advice to support your decision-making for program renewal.
Do you know your environmental exposures? Do you understand how could they impact your financials or limit your forward progress? Should your company or organization consider environmental insurance? What are the costs of not doing so?
Find answers to these questions, other helpful information and instructive documents on JLT Specialty USA’s profile.
Or contact JLT directly with your questions about planning a safe and sustainable path forward that packages your environmental risk more efficiently.
ABOUT THE ENVIRONMENTAL PRACTICE
JLT’s Environmental Specialty Practice (ESP) team provides the strategic expertise to assist its clients to better understand their exposures and the potential impacts they can impose on a corporate enterprise. This includes both short and long-term financial repercussions and the associated public relations catastrophes. ESP’s team members are experts in the development and placement of complex Environmental and Professional Liability products. ESP delivers, on a time-sensitive basis, integrated solutions with a perspective to integration with the client’s overall risk management strategies. ESP utilizes a holistic approach that combines the synergies between its Environmental and Professional practitioners’ deep industry knowledge, product expertise, and market leverage, with JLT’s significant global client base. This process starts with interactive exposure identification through due diligence and priority discussions; from there we can develop a strategy for potential risk-transfer solutions, including standardized protective contract terms, third party protections and insurance solutions with identified insurer partners and an execution timeline.
ABOUT THE ANALYTICS & CONSULTING TEAM | The JLT Specialty Analytics & Consulting Practice focuses on developing and delivering key insights and outcomes that support decisions and strategies. Its experts value the importance of strong data where it makes an impact, but are not constrained by past events, previous ways of thinking, or historical methods. Its willingness to move beyond the past to extrapolate around specialty experience and industry elements sets us apart in our ability to provide you advice. JLT’s Analytics & Consulting Practice comprises actuaries, forensic accountants, statisticians, engineers, safety experts, and scientists with creative problem-solving capabilities. Its analytics value is delivered through a global network of retail and reinsurance professionals with experience in natural catastrophe, terrorism, liability, and specialty-line risk modeling and quantification. Its consulting value is delivered through CPAs, certified safety professionals, and data and analytics specialists.