The PFAS Predicament: How Underwriters Can Respond

If you're not already familiar with PFAS, it should be on your radar. These widespread chemicals have insurers wondering if it could be the new asbestos, with massive payouts looming from a variety of unanticipated claims. Already this year, 3M agreed to a $10.3 billion settlement over PFAS, while Chemours, DuPont, and Corteva collectively reached a $1.185 billion settlement.

Many insurers are working to understand the evolving risks of PFAS and adapt their underwriting strategy, operations, and technology to tackle these critical - and potentially costly - concerns.

What is PFAS and why should insurers care?

Per- and polyfluoroalkyl compounds, commonly known as PFAS, are a type of chemical that effectively resists fires and repels water, oil, and grease. Because of that, it is used in many products, including fire suppressants, nonstick pans, food packaging, textiles, and more.

There are a few key reasons why environmental and public health experts are concerned about PFAS:

1. It causes negative health effects - While the current understanding of PFAS impacts is limited, exposure to certain levels and types of PFAS can lead to reproductive effects, developmental effects in children, increased risk of certain cancers, and more.
2. It's very common - Many consumer and commercial goods contain PFAS, including fire extinguishing foam, nonstick-cookware, and certain cosmetics. It also appears to move through soil, which means PFAS can be found in drinking water near chemical, industrial, and military sites.
3. It lasts 'forever' - PFAS breaks down extremely slowly, and can build up over time, meaning that expensive removal procedures are necessary to mitigate risk.

We are still learning more about the health impacts of PFAS, and as of now, there is no 'signature disease' associated with it, like we saw with asbestos and mesothelioma. This complicates the ability for claimants to tie back adverse health effects directly to PFAS exposure.

Broadly, though, there are a few types of claims that have been or may be associated with PFAS risks

1. Environmental cleanup - So far, most of the attention has been in this category (e.g., 3M and Dupont). Typically, claims involve PFAS leaking into the groundwater from a production facility or area with high PFAS usage.
2. Occupational exposure - These lawsuits are coming in now, including a complaint by the International Association of Fire Fighters this summer and a bevy of product liability claims from individual firefighters.
3. Consumer use - These personal injury and property damage claims likely face an uphill battle, given how prevalent PFAS is and the lack of a signature disease. We are still in the early stages of seeing these claims come through.

The liability piece for insurers is still a bit uncertain and varies widely by state, policy type, and specific details of the claim. Still, insurers are trying to determine their PFAS exposure and how to adjust their underwriting operations going forward.

How does Kalepa help insurers underwrite PFAS exposure?

Different carriers are taking different approaches to underwriting PFAS. Some are starting with a more conservative approach, excluding all classes of business that feature a PFAS risk. (This is hard - PFAS is virtually everywhere.) Others are taking a more nuanced approach, using technology to flag PFAS exposures and employing detailed underwriting to identify the magnitude of the exposure. This allows them to price according to the level of the risk and avoid particularly concerning submissions.

Regardless of your strategy, it's important that your underwriters and your technology focus on identifying PFAS exposures - and that’s where our Copilot underwriting workbench can help. Depending on business class and line of business, Copilot is already flagging many of the telltale signs of significant PFAS exposure, including:

• Business classes with particularly high risk levels (e.g., certain manufacturers, airports, fire departments)
• Locations with past fires, since PFAS is commonly found in fire retardants
• News articles about the business that mention ties to PFAS
• For manufacturers, identifying if the products they produce contain PFAS
• Identify geographical exposure to PFAS, based on nearby incidents

And since Copilot automatically ingests loss runs, soon we'll be flagging PFAS exposure based on claim history, to identify explicit PFAS-related claims and even more historical fire exposures. Copilot can also integrate external risk models - either from the insurer or from a third party - to consolidate all of your PFAS insights in one place.

Top three tips for underwriting PFAS

To close, we wanted to offer three quick tips for how to improve your response to PFAS exposures:

1. Get informed - Make sure you understand the impacts of PFAS, where the exposures are, and what the expected claims landscape looks like for your book of business.
2. Implement a strategy - Determine how you want to treat these risks, anywhere from blanket exclusions to hyper-targeted quoting, and make sure your technology supports your underwriters in implementing this strategy
3. Stay ahead of the curve - Our collective knowledge about the risks of PFAS, its prevalence, and the regulatory environment around it is continually changing. Partner with vendors who are in-the-know about PFAS and can help your underwriters stay one step ahead.

We're already helping our carrier and MGA partners with all three of these. If you want to talk about how PFAS is impacting your business and how our Copilot underwriting workbench can help you select better risk, set up a demo today.