Managing environmental risks in M&A transactions

Merger and acquisition (M&A) activity remains strong, with data from Mergermarket indicating that the second quarter of 2018 saw global M&A values reach their highest point since the 2008 financial crisis.

Whether buying or selling a single site or purchasing another company and its assets, environmental liability transfer needs to be seriously considered in any transaction due to the potential inheritance of unknown pre-existing exposures.

Warranty and indemnity insurance (known as representation and warranties insurance in the US) often excludes environmental pollution liability. A suitable environmental policy can act as an enabler in the M&A transaction process, ensuring excessive risk is not transferred to the purchaser (or seller) whilst protecting the overall balance sheets of both parties.

WHAT WE DO

M&A what we do 

If a company has not undertaken any environmental due diligence, we can advise on the types of surveys required and what its contaminated land liabilities might be.

The next step would be to assess the company’s environmental due diligence to determine whether it is satisfactory for underwriting purposes.

A pollution ‘bolt on’ may not cover all the client’s exposures during the transaction and most transactions are not assessed by an insurer with a dedicated environmental practice.

M&A what we do 

Where the information and delineation of existing contamination is available, we have been successful in securing coverage for known contamination.

Regulators have the right to remedy damage and pass on the cost of such remediation to the ‘polluter’. In the event that the polluter cannot to be found, the landlord will be ultimately responsible.

We can liaise directly with estate management companies to ensure a suitable programme is in place to ensure returns on investment are maintained and risks to a property portfolio are suitably covered.

Key Facts

200% Increase in the level of environmental placement in 2017-18GBP 5 Million + placed into the London market400 million+ environmental capacity accessible in the London marketsOne of the largest environmental broking teams in London

WHY JLT

Companies see environmental exposures as one of their biggest emerging risks and our global team have the underwriting, engineering, consulting, claims and wordings expertise to provide market leading advice.

This expertise has resulted in a 200% increase in the level of environmental placement in 2017-2018. This has been matched by a doubling in size of the environmental specialist team, which has access to GBP 400 million of environmental capacity in Lloyds and London markets.

Our specialist knowledge of key industry areas is complimented by strong and diverse relationships across the specialty insurance market and access to traditional and emerging markets through the JLT International Network.

We work closely with clients to structure a policy that mirrors their risk profile and transfers the appropriate level of risk to the right insurer.

Additional services include:

  • Programme gap analysis - identifying coverage gaps in existing programmes, discussing how these could impact a business and the extent to which they can be covered
  • Global programme advice - including where legal and regulatory regimes may require local policies or heightened environmental due diligence
  • Risk solutions - through our engineering team, we are able to provide fee-based surveys and advice to support clients in reducing programme premiums
  • Claims liaison and support - our claims advocacy team have experience across a number of complex environmental claims, ensuring the best interests of our clients are represented.
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