The cautionary tale at the heart of this year's EIL claims intelligence report is one of increasing weather extremes and wildfire risk.

The European claims statistics used in the latest AIG whitepaper on Environmental Impairment Liability reflect the growing maturity of the product and the evolving risk landscape. The story they tell is that environmental risk is becoming an issue for all industry sectors - no longer just heavy industry, facilities and transportation, but increasingly retail and real estate among others. 

We also see plenty of evidence that regulators are keen to flex their muscles where environmental liability occurs, particularly where repeat offenders are concerned. Remediation costs and fines associated with environmental damage are rising as a result. 

The claims information in our second European EIL Claims Intelligence Report also highlights a new and concerning exposure: the increase in fire-related losses. This is significant within the wider context of climate change, changing land use and habitat management patterns as well as awareness that European companies themselves can be the cause of a devastating wildfire. 

It is widely agreed (and confirmed in the IPCC's Fifth Assessment Report) that many parts of the world are now facing drier and hotter conditions as a result of climate change. The build up of brush and other vegetation makes it easier for fires to start and spread out of the control. 

From an EIL perspective, pollutants from major fires can affect air quality for thousands of kilometres and cause extensive physical damage to forests, water systems and other natural habitats. Meanwhile, increased construction along the wildland-urban interface (WUI) means the built environment is more exposed to wildfire in the past. 

While the risk of fire as a source of environmental impairment is growing, the methods (or lack thereof) with which companies seek to dispose of extinguishing waste water on their premises can also causes significant damage.  

Notified events relating to emergency fire response doubled in 2017 to 15% of all notified losses, some of which were due to incidents where fire fighting chemicals had leached into the soil and waterways due to poor containment provisions.

One of the 2017 losses detailed in the report was that of a wildfire in Southern Europe which began when routine maintenance was taking place on an overhead power line. The power line fell, sparking a blaze that caused extensive environmental damage to the surrounding area. 

The obvious parallel between this example and the Camp Fire in California, which is thought to have been ignited in a similar manner, is particularly poignant. Many of our insureds are power companies and we are urging them to prepare for more climate extremes in the future, both in terms of managing and mitigating their exposures and ensuring they have the right cover in place.

Unfortunately even the best risk management practices cannot always prevent major events, such as fires, from taking place. Companies know this. They continue to take out property and fire insurance to protect their premises, despite having installed sprinklers and fire doors, for instance. 

We are urging our insureds to think about EIL insurance in much the same way. While they may feel they have all their environmental exposures management, EIL products are there to cover their losses, get their business back up and running and remediate any damage to the environment as quickly as possible, should the unforeseen happen.

You can view the full European Environmental Impairment Liability claims intelligence report on the AIG UK website