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Waste sector fear over increasing insurance costs

Waste and recycling businesses are facing ‘significant’ rises in their insurance premiums, which could rise further after a major insurer pulled out of the sector.

Last week Catlin Insurance Company said they were no longer underwriting risks for the waste industry, having made a net loss during five years of covering waste businesses.

Stephen Wise, business development and technology director, Neales Waste Management, said: “The recent withdrawal of Catlin will further reduce the already depleted pool of insurers underwriting waste and recycling facilities.

“The reduction in the number of insurers working in there sector, coupled with an increase in accidents and claims, has resulted in a significant increase in premiums.”

Paul Clements, head of sales and marketing at Wastecycle, said: “This will continue until insurer confidence returns.”

“Insurance industry can’t be expected to underwrite risks if they have no confidence that proper steps are being taken to manage the risk”

Phillip Ward

Both Wise and Clements said insurers increasingly require more sophisticated safety equipment such as fire detection and control systems. Such systems are expensive and insurers see added risk in fast advancing recycling technologies.

Wise said: “It is hard to budget for these costs at the outset of a project and there is the potential for them to increase once the development is underway.”

He added that a “one size fits all approach” by insurers in setting premiums means businesses taking reasonable preventative measures are not being differentiated from those with lower standards.

He said the industry needs to build better relationships with insurers to aid this differentiation.

Meanwhile, Clements said there needs to be a cross-sector improvement to control escalating premium costs.

Paul Evans, chartered insurance broker at Butler Evans, said: “The insurance industry has both the expertise and experience to take on these risks at fair premium levels, the main problem is that the majority of businesses in this sector still lack the necessary levels of fire risk management.”

He called on the recycling sector to form a common trade association to help establish an industry wide risk management standard to give insurers the confidence to re-enter the market.

He added: “I am aware of the various campaigns for Government or waste industry to take over insuring this sector, but I cannot see that working.

“The nature of risks in the sector are so varied that you could not develop a fair charging system for such a scheme and good quality risks would end up subsidising the losses of the bad.”

Colin Panzetta, senior class underwriter at Catlin, told MRW that various unrated insurers have “dabbled” in the waste sector.

Unrated insurers have not paid a rating company to examine them and produce an assessment of their financial stability. 

Evans said: “Profitability is one factor, but when Catlin are put under competition for business by unrated carriers, I can fully understand why they have chosen to use their capital elsewhere.”

Philip Ward

Former WRAP director of local government services Phillip Ward told MRW: “The insurance industry can’t be expected to underwrite risks if they have no confidence that proper steps are being taken to manage the risk and especially if there is any chance that fires may be regarded as “convenient” in a sticky market.”

Waste Insure, a broker which runs a waste and recycling scheme, said it had been inundated with calls from companies looking to arrange alternative cover, after Catlin pulled out.

However, managing director of retail Damian Hayes warned that poor risk management by recycling companies meant its scheme would be unlikely to accept all the risks Catlin had written.

 

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