—Bruce Kranz
Hylant Environmental Risk Management

Brownfields, those abandoned industrial sites riddled with contaminated soil and legal liabilities, have long been sticking points for divestitures and redevelopment. Communities and developers fear unknown contaminants, while corporations considering an acquisition shudder at the thought of skyrocketing cleanup costs.

But expenses and liabilities now can be controlled and indemnification provided through the application of environmental insurance products aimed at promoting brownfield acquisitions and redevelopment. Pairing technical expertise with specialized insurance has opened the door for mergers and acquisitions previously considered too risky.

In Sayreville, New Jersey, liabilities related to a former industrial site have stalled redevelopment on the 400-acre property. The waterfront site just outside of Manhattan was long considered unusable until recently. Now, with the use of technical expertise by an experienced brownfield redevelopment team, coupled with environmental insurance, the site is slated for cleanup and a $1.5 billion upscale, mixed-use development.

Environmental risk insurance has evolved into a specialized market designed to provide risk transfer, while preserving a company's bottom line. Improved brownfield regulatory programs, experienced redevelopers and a well-developed line of environmental insurance products have created vast new possibilities.

Putting these insurance products to work and securing them at cost-effective rates, however, requires highly skilled, technically experienced insurance brokers, who understand the regulatory and remedial relationship of environmental issues. It is imperative that an environmental broker understands industrial construction as well as the science of brownfield remediation.

Basic environmental insurance policies include:

• Contractor pollution liability and pollution legal liability for operational manufacturing exposures
  
  
• Pollution legal liability insurance for acquisitions and divestitures
  
  
• Blended programs that include cost caps, pollution legal liability and funding for the expected cost of a site-specific remediation and third-party liability transfer
  

Blended programs that can include a combination of cost cap, contractor pollution liability and pollution legal liability coverage, as well as funding for expected cleanup costs, have emerged as state-of-the-art industry breakthroughs to facilitate complex redevelopments and divestitures.

Bruce.Kranz@hylant.com | 216 674-2443

Sayreville, New Jersey – Hylant Group, the nation's seventh largest privately held commercial insurance brokerage, has been named to provide environmental insurance brokerage services related to the economic redevelopment of a former industrial site in Sayreville, New Jersey.

This month, the Sayreville Economic Redevelopment Agency announced a team headed by LNR Northeast Investment of Quincy, Mass., to redevelop the 400-acre former National Lead site. The redevelopment will include extensive cleanup of various environmental contaminants.

Hylant Environmental Risk Management practice will consult LNR on cost-of-risk strategies associated with the cleanup and provide brokerage services for a variety of environmental insurance products.

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—Aaron Eidenier, Hylant Group

Deregulation and trade liberalization have opened the doors to the world marketplace and have allowed capital to flow across borders at an unprecedented pace. As these conditions accelerate, so do the inherent political, social and economic risks associated with increasingly complex transactions.

Consider the following scenarios:

• A U.S. company's operating agreement is radically changed by a newly elected government, and profits are substantially reduced.
  
  
• A natural disaster in Southeast Asia closes a main shipping port preventing the shipping of goods for an extended time.
  
  
• New regulations are imposed on foreign investors, making it difficult to compete with local businesses.
  
  
• Increased anti-American sentiment forces the closure of a U.S. manufacturing facility in a foreign country.
  
  

Any business involved in overseas operations, as well as exporting or importing goods, can benefit from a political risk assessment to identify potential issues. And while conditions change rapidly, a political assessment should be added to an ongoing risk management program.

An effective political risk assessment typically examines the following:

• A country-by-country evaluation of potential political, legal and economic issues.
  
  
• Potential countries and situations most detrimental to the balance sheet.
  
  
• Supply chain road mapping—identifying key trade routes and interdependencies.
  
  
• Senior management support and involvement.
  
  
• Dependency on individual suppliers and a review of outsourcing agreements.
  
  
• Business continuity planning in the event of a crisis.
  

Simply identifying and addressing potential risks can help a company prepare for the unexpected. And while these risks have always existed, today's political risks have evolved and become considerably more complex.

Once the greatest risks have been identified, a strategy to mitigate and manage them can be implemented. The process typically includes new organizational procedures, tightening legal and financial controls and creating disaster plans.

Another option could be political risk insurance, which has expanded and become more flexible in recent years. It can be tailored to protect many forms of political risk and supply chain disruption.

Today's global economy can provide many opportunities, but with these opportunities lie inherent risks. Whether you are doing business in every corner of the world or are just testing the international waters, effectively identifying and managing political risk can be critical.

Aaron.Eidenier@hylant.com