repost: Environmental Insurance: The Newest Tool in Brownfields Development]]

[Tony Chenhansa <tonyc@cpeo.org>]

In regards to requests for HUD's insurance report, this message was
previously posted on Feb. 8, 1999.  The revised link for downloading the
report is

http://www.huduser.org/publications/econdev/envins.html

Tony Chenhansa


-------- Original Message --------
Subject: Environmental Insurance: The Newest Tool in Brownfields
Development]
Date: 08 Feb 1999 09:17:08
From: owner-hudusernews@aspensys.com
Newsgroups: cpeo.brownfields

Subject: Environmental Insurance: The Newest Tool in Brownfields
Development]

 Environmental Insurance: The Newest Tool in Brownfields Development

 A new tool is available to promote the cleanup and redevelopment of
 brownfields: environmental insurance (EI). A report released by HUD's
 Office of Policy Development and Research examines EI's potential to
 stimulate increased redevelopment of such sites. Environmental
Insurance for Brownfields Redevelopment: A Feasibility Study also looks
at the
 extent to which the public sector can target this insurance toward
 particular areas.

 The authors found that EI can reduce the risk and liabilities
associated with brownfield redevelopment by limiting exposure to cleanup
costs. EI
 helps quantify risk, which makes lending institutions more likely to
 invest in redevelopment. The authors also found that local economic
 conditions may positively affect the ability of EI to promote
 redevelopment. For example, in weak real estate markets, even minor
 reductions in risk can enhance the marketability of brownfield sites.

 According to the report, private sector demand for EI is growing
rapidly, often due to speculative redevelopment by venture capital pools
using
the insurance for risk management and loss prevention. Conversely, the
report states that public sector demand for EI is virtually nonexistent.
While
 most of the city officials interviewed were actively pursuing
brownfields
 redevelopment, most were either unfamiliar with EI or skeptical that it
 could help them. Public sector purchasing procedures, especially
multiple bid requirements, often created insurmountable obstacles for
insurance
 providers as they tailored coverage to meet a city's brownfield
development needs.

 The report identifies an emerging mix of five EI products that may be
 useful to cities and others in the public sector who are involved in
 brownfields redevelopment. Each of the products reduces risk in
different ways:

 *  Professional liability insurance covers errors and omissions by
public agencies or private firms that manage or deal with contaminated
land.

 *  Owner/operator liability insurance covers the firms or agencies
working on the site.

 *  Cleanup cost-cap or stop-loss insurance places an upper limit on the
 cleanup for site redevelopers.

 *  Legal defense insurance covers lawsuits associated with liability
claims.

 *  Re-opener or regulatory action insurance covers costs associated
with any future government actions that require further site cleanup.

 The authors recommend that local development agencies encourage the
 redevelopment of small sites by pooling potential projects that an EI
 policy could cover. Agencies could encourage land owners to buy the
group
 coverage to make their sites more marketable, or public agencies could
 purchase EI coverage for the pools and make it available to site
 redevelopers.

 The report also recommends that additional research occur before the
 Federal Government takes an official position on environmental
insurance.
 This research should show whether EI provides access to project capital
 that would not otherwise be available. It should also examine if the
 differences between central city and suburban sites have implications
for
 insurance coverage. Finally, new research should determine how the role
of
 EI could change with the strength of the local real estate market.

 Environmental Insurance for Brownfields Redevelopment: A Feasibility
Study
 is available online from HUD USER at:
http://www.huduser.org/publications/econdev/envins.html.  Copies may
also
 be obtained from HUD USER for $5.00.

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