NEWMOA

1. NEWMOA Workshop on Environmental Insurance & Brownfields Michael P. Long Senior Vice President March 21 and 22, 2007

2. The Duties of an Insurance Broker • Provide independent, objective insurance advice • Perform risk analysis/program design/placement servicing/claims management • Leverage relationships with insurance carriers on behalf of clients

3. ENVIRONMENTAL LIABILITIES • Potential Liability Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) issues of previously owned or newly acquired plants that generated Hazardous Waste • Potential Liability Under State Environmental Law • Potential Liability under the Resource Conservation and Recovery Act (RCRA) or similar state law .

4. CERCLA LIABILITIES and TOXIC TORTS • Cleanup Costs • Natural Resource Damage Claims • Potential Liability for Non-Owned Disposal Sites • Third Party Claims for Bodily Injury and Property Damage

5. CURRENT OPERATIONS AND RCRA • Gradual Pollution Releases • Catastrophic events • Improper waste disposal

6. ENVIRONMENTAL LIABILITIES • Does the property have environmental liabilities ? • How do we deal with them ?

7. MEASURES TO ADDRESS LIABILITYIN CONTAMINATED PROPERTY TRANSACTIONS • Estimate Cleanup Costs And Adjust Price • Also Estimate Tort Liability Costs • Escrow Necessary Funds And Hold Until Cleanup Is Completed • Seller Agrees To Indemnify Buyer For Any Costs Incurred (May Be Limited With Respect To Time And Amount) • Insurance May Be Used To Supplement Or Replace Other Risk Management Measures

8. Environmental Insurance Defined • Pollution Legal liability insurance offers protection against potential liability for site cleanup and third party claims related to pollution conditions. • Cost Cap insurance is used to insure against cost overruns related to site cleanup projects . • On Brownfields projects, both Pollution Liability and Cost Cap policies are often used on a combined basis. These coverages can sometimes involve finite risk components.

9. POLLUTION INSURANCE CARRIERS • Carriers ACE , AIG , Chubb , Zurich, XL • $50 million capacity per site • 10 year terms • Only ACE , AIG , ZURICH and XL offer Cost Cap

10. INSURANCE SOLUTIONS • POLICIES • Pollution Legal Liability • Cost Cap • Blended Finite Risk

11. POLLUTION LIABILITY COVERAGE • Cleanup – On-site, Off-site • Bodily Injury – On-site, Off-site • Property Damage – On-site, Off-site • Legal Defense Expense • Covers Current and Past Operations

12. POLLUTION LIABILITY COVERAGE • Non-owned disposal sites • Re-openers Under Regulatory Order • Changes In Regulations That Require Additional Remediation • Discovery of New Contaminants (Onsite/offsite) • Third Party Claims for Bodily Injury, Property Damage or Cleanup Costs (Onsite/offsite) • Natural Resource Damage Claims • Loss of Use or Loss Of Rents • Business Interruption Due To Contamination

13. POLLUTION LIABILITY COVERAGE • Terrorism Coverage – CGL/Property programs - no coverage for nuclear, biological, radiological or chemical attacks. • Buy back option on pollution policies • Full Limit • Additional premium • TRIA and Non TRIA • Terrorism Endorsement • Change Definition of Pollution Conditions • Pollution Conditions means the discharge, dispersal, release or escape of any solid, liquid, gaseous or thermal irritant or contaminant, including, but not limited to, smoke, vapors, soot, fumes, acids, alkalis, toxic chemicals, medical waste, waste materials, and bacterial matter which is released as a result of an act of terrorism, viruses or other bioterrorist agents of any kind….

14. Pollution Liability Common Exclusions • Asbestos, or asbestos containing materials, applied to any building or other structure.  • Contractual Liability • Employers Liability  • Criminal Fines and Penalties  • Insured’s Internal Expenses  • Intentional Non-Compliance     • Known Conditions not reported • Underground Storage Tanks that are known but not reported. • Insured vs. Insured • Transportation

15. COST CAP • Cost Cap covers cost overruns for: • New found contamination during execution of RAP • Change orders required by government that are incurred during the policy term

16. COST CAP • Cost Cap Basic Structure: • Insured may participate in Cost Overrun

17. LIABILITY BUY–OUT USING FINITE RISK CONTRACT • Contractor may assume Contractual and Legal Liability at Fixed Price • Risk Finance and Risk Transfer Insurance • Custom Designed Structure and Endorsements

18. FINITE RISK • Finite insurance contracts fund known or anticipated claims/expenses over a period of time. • Typical insureds are companies who have environmental liabilities from past operations • Offset environmental liabilities from the balance sheet by contract transfer to an insurance program

19. Cost Cap andPollution LiabilityInsurance Unexpected Claims/Costs DOLLARS Remediation Project Costs/Funded O&M Monitoring Costs/Funded TIME FiniteRisk BLENDED FINITE PROGRAM

20. Due Diligence exercise and protection against Catastrophic events Quantifies Cost of Cleanup and potential Tort Liability Removes uncertainty associated with Environmental Liability Worldwide Coverage BENEFITS OF ENVIRONMENTAL INSURANCE

21. Mike Long BIO