Susan,
Based on several degrees in statistics and econometric
theory, I can assure you that the Monte Carlo simulations can be performed almost instantaneously unless,
of course, you are referring to those insurers who are still utilizing abacuses.
Once you have established the assumptions, modern computer technology permits
you to perform the Monte Carlo simulations without any major cost except for the analysis and
interpretation of the results.
It is clear that insurance companies do not want to bother
underwriting small sites since the premiums are not commensurate with the time
expended, while most of the environmental and business risks are undiminished
by the small size of the expected profits. Note that insurance companies
will still underwrite small sites where a major client provides other business.
They are the ultimate rational player in these markets.
Bruce
Bruce-Sean Reshen
The MGP Group
733 Summer Street – Suite 405
Stamford, CT 06901
p. (203) 327-2888, X 18
f. (203) 327-2999
c. (917) 757-5925
-----Original Message-----
From: brownfields-bounces@list.cpeo.org
[mailto:brownfields-bounces@list.cpeo.org] On
Behalf Of SusanNeumanEsq@aol.com
Sent: Sunday, June
03, 2007 5:34 PM
To: LSchnapf@aol.com;
brownfields@list.cpeo.org
Subject: Re: [CPEO-BIF] BCP Data
Followup and Self-Directed Cleanups
On the issue of cost overrun insurance for small sites, I
will have to weigh in more on the side of Peter than Larry. It begs the
question to say that the reason for insurers' reluctance to provide the
coverage is inability to obtain sufficient premiums to cover the risks.
The reason insurers are refusing to cover overruns over small dollar value
cleanup costs or, in a move that has the same effect, are charging
premiums that eliminate small sites (e.g., $350,000 as a minimum premium) is
not so much in the cost overrun risk itself but in the insurer's internal costs
for underwriting the risks. Underwriting the risk at a small site takes at
least as much time, effort, and analysis (including Monte Carlo modelling)
as underwriting large sites, so insurers have to charge premiums that are
relatively too high. Small sites typically are less
well characterized and the engineering information they come with is
less complete than that of large ones, and that makes the underwriting process
even more difficult or impossible.
Susan Neuman, Esq., Ph.D.
Environmental Insurance Agency, Inc.
138 Chatsworth Ave.
Larchmont, NY 10538
914-833-5100 (phone)
914-833-5102 (fax)
www.enviroinsurance.com