As the world continues to confront mounting environmental challenges, the insurance industry is evolving in response. With 2025 on the horizon, environmental risks—ranging from climate change to emerging pollutants—are becoming more complex, creating new opportunities and challenges for insurers.
From the rising demand for carbon sequestration coverage to underwriting concerns surrounding PFAS, Canaan Crouch, EVP at Jencap Specialty Insurance Services, environmental and energy division, shared insights into the trends shaping the environmental insurance market and offered a preview of what lies ahead.
Addressing the PFAS Challenge: Diverging Strategies
“PFAS continues to be a challenging issue in the environmental insurance landscape,” said Crouch.
Per- and polyfluoroalkyl substances (PFAS) are a group of chemicals widely used for their water- and stain-resistant properties. However, their persistence in the environment has raised significant health and contamination concerns.
“While some carriers are adopting a measured approach by underwriting exposure and offering limited coverage for PFAS, others are taking a firm stance, opting to exclude PFAS exposure entirely. This divergence underscores the broader uncertainty surrounding these compounds as insurers navigate the complexities of long-term environmental risks,” Crouch explained.
Despite this caution, the broader market is witnessing the arrival of new entrants offering increased capacity. Some of these players are introducing innovative solutions in emerging areas such as carbon sequestration—a coverage area poised for significant growth in the coming year.
Carbon Sequestration Coverage: A Growing Market
“When people talk about carbon sequestration, they’re referring to the process of capturing excess carbon from the atmosphere,” Crouch explained. This process helps reduce greenhouse gas emissions and mitigate climate change.
This emerging area is gaining traction as industries, particularly high-emission sectors like ethanol production and coal-fired power plants, seek to lower their carbon footprints and leverage government incentives such as tax credits.
Carbon capture and storage insurance can cover risks including:
- Transportation risks: Insurance can cover the risks associated with the transport of captured carbon from the source to sequestration sites. This includes potential accidents, leaks, or environmental damage during transportation.
- Storage risks: Policies may cover risks related to the storage of carbon in underground reservoirs, including the integrity of the storage facility, potential leakage, and environmental harm due to improper containment.
- Monitoring and maintenance: Coverage can extend to the monitoring systems used to track the carbon storage process. This includes potential failures of equipment or monitoring systems and the costs associated with maintaining proper storage conditions.
- Regulatory compliance: Insurance may cover costs associated with ensuring that carbon sequestration activities comply with local, state, and federal regulations, including any fines or penalties from non-compliance.
Balancing Risk and Revenue
What’s driving the ability of new market entrants to offer increased capacity and innovative coverage options like carbon sequestration? Crouch attributes this shift to two key trends: the maturation of the environmental insurance industry and the growing expertise of its workforce.
However, this evolution brings added pressure. “With a highly skilled, senior workforce, the cost structure of underwriting firms can become quite high, intensifying the incentive to generate revenue,” Crouch noted. As pricing nears its ceiling, environmental insurers are finding they can no longer rely solely on price competition. Instead, they are shifting focus to expanded coverage options and a willingness to take on more risk to maintain relevance and profitability.
As Crouch confirmed, “People are competing through coverage extensions versus just price, as there’s only so far you can go with pricing before you’re not making money.” This strategy shift reflects the industry’s evolution from price-based competition to a more nuanced focus on value-added solutions, which is expected to continue driving the market in the coming year.
As the environmental insurance industry continues to adapt, its ability to innovate and balance risk with opportunity will be pivotal in addressing the complex challenges of a changing world.
