Using E&A Reserves for Redevelopment

[Emery Graham <egraham@dca.net>]

Susan,
I really appreciate your feedback on this. Does it make sense to talk to an
insurer who has liability and an insurer that finances development projects to
see if there's ground to develop a win-win scenario,e.g., the developing
insurance agency assumes the liable insurance agency's liability along with a
payment from the liable agency. The payment represents the developing agency's
estimate of the cleanup costs  in the projects pro forma. They assume the
remaining exposure as planned. The developing agency uses the payment to help
fund the cleanup, leverage governmental funds, increase the profitability
of the
project.

I'd argue that the developing insurance company should have commitments
from the
fed, state, and local gov'ts, the PRP and the commercial developer in hand
thereby making the liability assumption the "but for" money to make the deal
work. This approach assumes that the E&A reserves act as a loan financing
facility for development projects that reduce the liability that calls for the
reserve. What's the relationship between an insurance companies liabilities
and
its reserves? What's the marginal relationship between a dollar of
liability and
a dollar of loss reserve. I guess that's one analytical question that needs to
be answered. If I reduce the liability I must honor, how much of a
reduction in
my required reserves do I experience? Can I leverage my liability transfer
payment with Community Reinvestment Act funds from a participating bank? Can I
leverage these two sources with Economic Development Administration,
Department
of Transportation, Housing and Urban Development monies?

I hope that by sharing our dialog with the broader Brownfields community we
might spur some thinking and curiosity that gels into a workable idea.

Thanks again,
Emery

Susan Neuman wrote:

> Emery:
>
>     I certainly agree with you that cooperation rather than litigation is
> called for to reduce Superfund liability and redevelop properties, and I am
> intrigued by your idea that the environmental and asbestos loss reserves
> could somehow be leveraged with other funds available for commercial
> development. It might be difficult to do this because of insurance
> department regulations about loss reserves. Therefore, it seems to me that
> this would have to be done in the context of settling environmental coverage
> actions, which is why I am copying this email to Bob Faron at Putnam, Hayes
> & Bartlett,  one of the companies that specialize in settling those cases. I
> also think that the new environmental insurance products have to be part of
> the equation you are talking about. Insurance is another method of financing
> along with those you mentioned.
>
>       Insurance companies tend not to be unitary or centralized. The same
> ones that are financing development are not necessarily those that have the
> E and A liabilities or write environmental insurance. Those writing
> environmental insurance (AIG, Zurich, etc.) would be the ones most
> interested in your ideas. (Zurich is also doing some kind of brownfields
> redevelopment financing.)
>
>                                                                       Sue
> Neuman