United States        Office of Emergency and    EPA 500-R-96-001
           Environmental Protection   Remedial Response      OSWER 9230.0-74
           Agency          (5101)           PB96-963244
           	June 1996	


<&EPA    Potential  Insurance Products


           for Brownfields Cleanup and


           Redevelopment



           Survey Results of Insurance Industry Products

           Available for Transference of Risk at Potentially

           Contaminated Property

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For more Brownfields information, visit our Internet World Wide Web Brownfields Home Page at:
http://www.epa.gov/brownfields/
Additional copies of this publication may be obtained from:

National Technical Information Service (NTIS)
U.S. Department of Commerce
5285 Fort Royal Road
Springfield, VA 22161
(703) 487-4650

Please reference document number: PB96-963244

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                                CONTENTS



                                                                       Page

Executive Summary	1

      A.    Background of Survey 	1

      B.    Summary of Key Findings	2

I.     Environmental Risk and Potentially Contaminated
      Properties	5

      A.    Risk Description 	5

      B.    Common Controls for Risks 	5

II.    Insurance Risk Transfer Mechanisms	7

      A.    Overview of Insurance Industry and Products  	7

      B.    Survey Findings 	8

            Table 1: Risks Covered by Respondents	10

            Table 2: Summary of Coverage for Risks	13

      C.    Market Factors Influencing Insurance Policies	14

III. Conclusion	17


Attachment 1:      Survey Contacts 	  Al-1

Attachment 2:      Complete Survey Responses	  A2-1

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Executive Summary

A.    Background of Survey

      EPA's Brownfields Economic Redevelopment Initiative is designed to empower
states, communities, and other stakeholders to work together in a timely manner to
prevent, assess, safely clean up, and sustainably reuse potentially contaminated
properties. Key players in economic redevelopment (prospective purchasers,
redevelopers, lenders, and investors) are sometimes reluctant to pursue redevelopment
activities at brownfields, however, for fear of incurring potential liability. These
liability risks leave many properties idle. Most liability risks can be grouped into three
broad categories:

           Remediation-based Risks  the potential that if site contamination exists,
            the owner/operator will bear the costs of cleanup, including site
            investigation and assessment, legal fees, and regulatory compliance
            consulting fees

           Property Value Impairment Risks  the potential that if site
            contamination exists, the owner/operator will bear the costs of lawsuits
            stemming from reduced value of neighboring properties and/or nuisance
            caused

           Personal Injury Risks  the potential that if site contamination exists, the
            owner/operator will bear the costs of lawsuits stemming from bodily
            injury caused by contamination existing on-site or migrating off-site.

      Some parties assert that insurance products in existence or under development
successfully transfer these risks from the key players  involved in brownfields
redevelopment to a third party.  EPA conducted this survey to test this assumption by
addressing the following three questions:

           Are insurance policies in existence or under development that could serve
            as risk transfer mechanisms for potentially contaminated properties?

           If policies exist or are under development, how many of the risks
            encountered at potentially contaminated properties (i.e., remediation-
            based risk, property value impairment risks, and personal injury risks) are
            covered, and how available are these policies?

           If no policies exist or are under development for specific risks, what
            factors are inhibiting their development and use?

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To answer these questions, EPA:

           Identified no more than nine representatives of the insurance industry,
            noted by industry contacts to be the key players

           Developed a list of questions to be used in phone interviews with the
            insurance representatives

           Developed a standard list of risks, to maintain consistency when
            insurance representatives referred to risks covered or not covered

           Conducted interviews

           Compiled and analyzed responses to answer the three key questions.

B.    Summary of Key Findings

      Eight insurance industry representatives were interviewed for this survey. The
following key findings emerged:

           All respondents indicated that insurance is available and is being
            purchased.

           All respondents indicated that the nine risks listed encompassed all
            known risks encountered at potentially contaminated sites.

           Five respondents cover all of the risks under existing insurance products;
            the remaining respondents cover all but property value impairment risks.

           Minimum coverage ranged from $1 million to $100,000 per policy.

           Maximum coverage generally ranged from $10 to  $40 million per policy.

           Typical coverage ranged from $2 million to $10 million per policy.

           Typical premium costs were approximately $5,000 per $1 million in
            coverage.

           Five respondents noted increased demand for environmental insurance
            policies in those states that have active brownfields programs or state
            voluntary cleanup programs.

           Common suggestions for EPA involvement included clarification of
            liability issues, more consistent implementation of risk-based corrective

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            action (RBCA) standards, and education about the availability of risk
            transfer insurance products.

      The following report discusses the findings of this survey in greater depth.
Section I provides an overview of the potential risks encountered by owners of
potentially contaminated property and discusses common ways key players control
these risks, including the use of insurance. Section II describes how the insurance
industry works and provides an overview of the main environmental insurance
products, a discussion of the survey findings, and market factors that influence
environmental insurance policies.  Section III offers concluding remarks and
recommendations.

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I.     Environmental Risk and Potentially Contaminated Properties

A.    Risk Description

      The commercial real estate industry has many uncertainties, or risks, that affect
the willingness or ability of potential players to participate in brownfields property
transactions.  Many risks, such as changes in market conditions and interest rates, are
inherent in the industry and provide opportunities for economic gain with limited risk.
Risks such as environmental liability, however, are not viewed as inherent in the
industry and often present greater potential for economic loss than for economic gain.
Many of these environmental risks encountered at potentially contaminated properties
fall into three broad categories: remediation-based risks, value impairment risks, and
personal injury risks.

      The first category of environmental liability risks is remediation-based risks,
related to Federal and state environmental laws and regulations that mandate cleanup
under certain circumstances. These risks include:

      Risk 1:      Cost of identification and determination of site contamination

      Risk 2:      Cost of site remediation

      Risk 3:      Cost of ensuring compliance with Federal and state regulations
                  during remediation (e.g., consulting and legal fees)

      Risk 4:      Cost of legal fees to defend against lawsuits brought by regulators
                  (Federal and state) and third parties.

      The second category of environmental liability risks is property value
impairment risks attributable to site contamination, or to the perception that the site is
contaminated. These risks are pursued through tort liability and include:

      Risk 5:      Payment required due to a nuisance caused to a neighboring
                  property (e.g., remediation of the site causes substantial noise in the
                  neighborhood - a nuisance)

      Risk 6:      Payment required due to the erosion of equity of a neighboring
                  property (e.g., the perception that there is contamination on the site
                  causes the value of a neighboring property to decline)

      Risk 7:      Payment required due to the decreased security interest of the
                  lender of a neighboring property (e.g., on-site contamination causes
                  the value of a foreclosed neighboring property to decline).

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      The third category of environmental liability risks is personal injury risks. Also
pursued through tort liability, these risks include:

      Risk 8:      Payment required because of personal injury occurring off-site
                  caused by migrating contaminants

      Risk 9:      Payment required because of personal injury occurring on-site
                  caused by site contamination.

B.    Common Controls for Risks

      The above risks can be reduced or eliminated in several ways, thereby increasing
the willingness of transaction decision-makers to pursue redevelopment at potentially
contaminated properties. Parties can control environmental risks in several ways:

           Indemnification Agreements  The seller provides the purchaser with a
            legally binding agreement stating that the seller will cover the purchaser's
            costs stemming from specified environmental risks (e.g., the purchaser
            will cover the cost of on-site remediation for contamination undiscovered
            at the time of the property transaction).

           Sell Price Adjustment  The seller will reduce the price of the property
            based on an agreed upon level of risk incurred by the purchaser (e.g., a $5
            million property with known contamination faces remediation costs
            between $1 million and $3 million; because of the risk that remediation
            may cost as much as $3 million, the seller reduces the purchase price to $2
            million).

           Self Insurance  A purchaser ensures that he/she can cover the costs of
            potential environmental risks by setting aside a reserve fund, or by
            pooling money in a reserve fund with other companies (e.g., a well-
            capitalized company uses its reserve fund to remediate contamination at a
            neighboring property caused by migrating contaminants from the self-
            insured company's property).

           Third-party Insurance  The seller or purchaser buys insurance to cover
            the environmental risks encountered at a potentially contaminated
            property (e.g., the purchaser of a potentially contaminated property buys
            an insurance  policy that covers up to $10 million of remediation costs for
            unknown site contamination).

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II.    INSURANCE RISK TRANSFER MECHANISMS

A.    Overview of Insurance Industry and Products

      Insurance is one of the best available tools for transferring and managing certain
financial risks. Through a complex process of risk determination, insurance companies
determine what risks encountered by businesses or individuals can be covered, or
underwritten, and then collect premiums for the policies, under which they agree to
pay for some or all costs or losses to these insured parties. Insurance companies
perform this risk determination through the following generic, three-step process:

           Statistical or Actuarial Analysis  a process to develop a profile of
            specific risks and the potential costs or losses associated with these  risks.
            This profile is developed using historical data accumulated on similar
            clients.

           Underwriting Analysis  a process to establish a relationship between a
            risk and its expected loss for a specific client. This analysis varies
            depending on the type of risk to be covered, but for potentially
            contaminated properties can include an analysis of site engineering data,
            business/financial stability, the business' regulatory compliance history,
            and surrounding site use.

           ludgment  a discretionary determination made by an insurance
            company on coverage of risks, particularly when there is insufficient data.
            In the case of risks at potentially contaminated property, this judgment is
            affected by two major concerns:

                Uncertainty of Liability  Under CERCLA, this incorporates how
                  retroactive, strict, and joint and several liability can affect potential
                  costs to cover risks.

                Economic Conditions in the Insurance Industry  The conditions
                  include the number of paid claims incurred based on policies sold,
                  as well as the willingness or ability of the reinsurance market (such
                  as Lloyds of London) to absorb some of an insurance company's
                  risks of future claims in exchange for a percentage of the premiums.

      Through experience, the insurance industry has collected sufficient data to
understand and underwrite the financial risks associated with potentially contaminated
properties. Thus, environmental insurance has developed as a distinct subset of
property and casualty insurance, which also includes homeowner and auto insurance.
The three most common policies available under environmental insurance that are
applicable to potentially contaminated properties are:

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           Property transfer insurance
           Cleanup cost cap or stop loss insurance
           Owner-controlled insurance.

      Property transfer insurance protects an insured against on-site cleanup of
unknown, pre-existing, or new conditions, and against third-party claims for off-site
cleanup costs that result from on-site pollution. An insured can add to this coverage
claims from third parties arising on-site or off-site from bodily injury or property
damage due to on-site contamination. This policy can provide coverage of remediation-
based risks, value impairment risks,  and personal injury risks.

      Cleanup cost cap or stop loss insurance protects an insured against a cleanup
project that runs substantially over budget. Policies require the insured to accept the
risk of the project going over budget by a  certain percentage of the estimated project
costs. The insurer pays only if the project  costs exceed the estimated costs, plus the
agreed upon buffer. This policy can provide coverage of remediation costs.

      Owner-controlled insurance allows an owner or prime contractor undertaking
cleanup to determine the desired scope of insurance protection against the acts or
omissions of other parties involved in the  cleanup. This includes protection against the
failure to perform by consultants, contractors, and subcontractors; against these parties'
aggravation of site contamination conditions; and against claims of contractors'
employees or other third parties for bodily injury arising from site contamination. This
policy can provide coverage for remediation-based risks, value impairment risks, and
personal injury risks.

      By clarifying how the insurance industry develops methodologies to cover risk,
and how this process has been applied to  environmental insurance for property
transfer, the current market for these products can more clearly be understood.

B.    Survey Findings

      EPA developed a survey to answer three questions: 1) Are insurance policies in
existence or under development that could serve as risk transfer mechanisms for
potentially contaminated properties? 2) If policies exist or are under development, how
many of the risks encountered at potentially contaminated properties are covered, and
how available are these policies?  3) If no policies exist or are under development for
specific risks, what factors are inhibiting their development and use?

      To answer these questions, EPA developed a list of potential risks and questions
related to the coverage of these risks. Using this list, EPA interviewed eight
representatives from three segments of the insurance industry: underwriters,

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insurance providers, and brokers (see Attachment 1 for a list of the insurance
representatives and the segment of the insurance market they represent).1

QUESTION 1: DO POLICIES EXIST?

      The unanimous answer to Question 1 was "yes."  Environmental insurance
policies that manage the financial risks encountered at potentially contaminated
properties have existed for several years.

QUESTION 2: WHAT RISKS ARE COVERED/HOW AVAILABLE ARE THE
POLICIES?

      The answer to Question 2 is summarized in four major categories: risks covered,
scope of coverage, cost of coverage, and demand for coverage. (Tables 1 and 2 are
attached to provide a quick reference for determining each representative's responses in
these four major categories.)

      Risks Covered: Respondents were asked about the availability of coverage for
      environmental risks related to remediation, value impairment, and bodily injury.
      The following summarizes the respondents' comments (Table 1 provides
      individual responses):

            The market covers environmental risks associated with remediation, value
             impairment, and bodily injury, although not all companies represented
             provide coverage for each of these areas.

            Remediation-based risks and personal injury risks are the easiest
             environmental risks to cover.

            Property value impairment risks are the most difficult to cover, although
             some coverage for these risks is currently available.

      Scope of Coverage:  Respondents were asked to provide specific information on
      limits of coverage for these risks (Table 2 provides individual responses):

            The minimum amount of coverage ranges from $100,000 to $1 million per
             policy, with several respondents indicating that they could offer lower
             coverage if needed.

            The maximum amount of coverage offered ranges from $10 to $40 million
             per policy.
Underwriters collect and analyze potential client data to determine what risk coverage can be offered and
at what premium. Insurers provide the actual risk assumption for the policies sold, through the pool of
invested premiums, or through reinsurers who accept some of the risks for a percentage of the premiums.
Brokers are the marketing/sales  arm of insurance policies, providing direct sales and service to potential
clients.

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      The coverage is currently offered only for commercial and multi-family properties, not for
       residential properties.

    Cost of Coverage: Respondents were asked about the typical costs to cover these risks (Table 2
    provides individual responses):

      The average cost was $5,000 per $1 million in coverage.

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    Demand for Coverage: Respondents were asked the number of policies sold covering these risks, the
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       had higher demand for these policies.

QUESTION 3:  IF THERE ARE NO POLICIES, WHAT IS INHIBITING THEIR DEVELOPMENT?

    According to respondents, policies exist that cover all known risks.
                                              12

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C. Market Factors Influencing Insurance Policies

   Survey results indicate that a growing array of products transfer risks associated
with potentially contaminated property from the players in economic development to a
willing third party. Two groups of factors, however, influence the availability and
marketability of useful policies.  Both groups of factors may impact the application of
this survey's results.

Availability Factors

   Availability of environmental insurance products, or its absence, is influenced by
factors inherent in both the insurance and the commercial real estate industries. These
factors include:

    Underwriting Factors: Cost of Cleanup  In order to accurately price the
      coverage of risks, environmental insurers must create tools or underwriting
      methodologies (as discussed in Section II.A.).  Respondents have developed
      underwriting methodologies which they deemed to be sufficient for this
      purpose. A key component of underwriting is the environmental consulting
      industry, which supplies  much of the underwriting information to insurance
      underwriters (some insurance providers have their own environmental
      consulting staff).  In its long history, the environmental consulting industry has
      been fairly predictable and consistent in its services, and is therefore an effective
      primary data source for insurance risk underwriting.

    Underwriting Factors: Property Value Impairment  Underwriting of property
      value impairment risks is directly related to appraisal industry practices. The
      appraisal industry's position is that value impairment attributable to
      environmental conditions is outside the purview of a routine appraisal, making it
      more difficult for insurance providers to underwrite property value impairment
      risks. Predictably, respondents indicated that property value impairment risk
      coverage is less often available, although some respondents do provide this
      coverage.

    Market Factors: Product Awareness  Many respondents were concerned that
      sufficient information is not available to the commercial real estate industry
      regarding the availability of environmental insurance products. If decision-
      makers in the marketplace are not aware of the availability of risk transfer tools,
      their usage in property transactions is greatly reduced. While this information
      dissemination is clearly the responsibility of the insurance industry, it was
      frequently suggested that EPA could provide useful support to the insurance
      industry's efforts to increase product awareness in the marketplace.
                                       14

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     Legal Factors: Uncertainty  A factor that impacts the extent of coverage is the
      uncertainties created by liability. Many respondents indicated a preference for
      jurisdictions where risk-based corrective actions standards have been
      implemented. It was further suggested that states with voluntary clean-up
      programs, as well active brownfields redevelopment programs provide a more
      favorable climate for environmental insurance. In addition, some respondents
      anticipate that as liability is further clarified, lender confidence will increase and
      coverage costs will decline.

Marketability Factors

    Insurance products, even at reasonable costs, may not provide adequate incentive
for players in economic redevelopment to purchase, redevelop, and reuse brownfields
because the current products lack many factors necessary to make them "marketable."
Three key issues, among many, affect insurance marketability:

     Policies offered focus on the "high" end of the market  The insurance
      industry tends to insure larger, well-financed transactions involving financially
      sound enterprises. Survey responses indicated the importance of financial
      soundness of the transaction and its parties in underwriting. While policy limits
      can be small, the relative cost of insurance increases as the policy limits decline.
      This limits the market appeal of insurance. Many brownfields' prospective
      purchasers may not qualify for insurance coverage because they are not as
      financially sound or well-financed as large corporations.

     Owners of properties still concerned with CERCLA liability  Many larger,
      financially strong companies are not interested in returning their properties to
      the real estate market until Federal and state hazardous waste laws further limit
      or clarify their liability following a cleanup and transfer of property. Even if a
      successive owner purchases insurance to cover its risk, the insurance company
      could seek payment from former owners for costs based on CERCLA's
      retroactive, strict, and joint and several liability. Some claim that a high
      percentage of brownfields are not placed on the market because of this uncertain
      future liability.

     Lenders reluctant to finance properties  Major sources of credit, like large,
      financially strong companies, fear being viewed as "deep pockets." They are not
      interested in financing the return of contaminated properties to the real estate
      market  if contingent liability risks are unacceptable, based on the uncertainties of
      future liability.
                                       15

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                16

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III.   CONCLUSION

   This report explores the risks encountered by prospective purchasers, lenders,
investors, and redevelopers at potentially contaminated property, and common ways
these risks are controlled or eliminated. Desire to control these risks has recently
spurred a great increase in the risk transfer mechanisms of environmental insurance
and the availability of products, breadth of coverage, and number of risks covered.

   Survey results indicate that many policies are  available to cover remediation, value
impairment, and bodily injury at insured properties.  There is a wide range of coverage
and costs for coverage are continually declining. The survey suggests, however, that
although insurance can facilitate the return of brownfields to productive reuse,
limitations on its usefulness and applicability for all brownfields exist.

   Finally, all survey respondents suggested several issues that could be addressed by
EPA to encourage redevelopment and reuse of brownfields through the use of risk
transfer insurance products.  Most respondents identified two particularly relevant
issues: lack of knowledge of available risk transfer insurance products; and lack of clear
risks and CERCLA liability encountered at potentially contaminated properties.
Insurers suggested that EPA pursue the following activities to address these concerns:

    Educate  EPA should help educate stakeholders (lenders, developers,
      investors, prospective purchaser, states, and localities) about the availability and
      use of insurance risk transfer mechanisms.

    Clarify  EPA should continue to clarify the liability encountered at these sites,
      including definitive closure of site liability.

    Implement  EPA should encourage broader and more consistent
      implementation of risk-based corrective action (RBCA) standards.
                                       17

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                18

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            Attachment 1:
          Survey Contacts
   COMPANY
   INDUSTRY
American
International Group

ECI Incorporated

ECS

Environmental
Warrantee

The Eric Group
United Coastal
Insurance

Willis Corroon
Environmental Risk
Management Services

Zurich American
Insurance Group
Insurer


Underwriter/Broker

Underwriter/Broker

Underwriter/ Broker
(for AIG)

Underwriter/Broker
(for Zurich)

Insurer


Broker



Insurer
                Al  -  1

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            Al  -  2

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                              Attachment 2:
                       Complete Survey Responses
Company                                                           Page

American International Group	 A2-2

ECI Incorporated	 A2-5

ECS 	 A2-8

Environmental Warrantee	 A2-11

The Eric Group  	 A2-15

United Coastal Insurance	 A2-19

Willis Corroon Environmental Risk Management Services	 A2-22

Zurich American Insurance Group 	 A2-25
                                 A2  - 1

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American International Group
  COMPANY: American International Group
  INDUSTRY: Insurer
I.  Do you have policies in existence or in development?

   Yes.

II. What is the coverage of these policies?

   A. Do these policies cover commercial or single-family properties?

      We cover only commercial properties.

   B. What risks are you covering?

      All of the risks listed are covered in some form. Potentially contaminated
      properties are usually covered under our "Select" policy, which is a menu driven
      policy covering these risks.  However, they usually include an exclusion for a re-
      opener.

      i.     What is the scope of coverage for these risks? Maximum coverage,
            deductible, etc.?

            Maximum coverage is around $35 million and minimum coverage is $1
            million. Deductibles can run as low as $10,000 and are variable depending
            on coverage.

      ii.    What are the underwriting criteria for covering these risks?

            The criteria are based on engineering data, site history, condition of
            surrounding sites (releases, as well as former operations), and financial
            condition of the company.

      Hi.    What is the demand trend for insuring these risks?

            The demand for covering these risks is greatly increasing because we as
            insurers have more flexibility on coverage and the price of these policies
            has come down. There has been an increase in demand over the past
            several years, but I cannot give any specifics on the trend.
                                    A2  -  2

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                                                     American International Group

   iv.    How many policies have you sold?

         I really have no estimate, but we have been writing these policies since
         1980.

   v.     Are the trends different in certain states (i.e., have state laws affected the
         demand for these policies) ?

         There are demand differences in certain states where insurance can pass
         for financial responsibility requirements, but I have not seen a difference
         in demand for redeveloping properties.

   vi.    What are the costs (i.e., premiums) for covering these risks?

         Premiums usually run around $5,000 per million of coverage.

   vii.   Do the relative costs of covering these risks increase as the value of the
         insured property decreases? If so, what needs to change for the relative
         costs to remain constant?

         Property value really has no consideration in rating the property. "Is it
         good business" is the main question.

B. Why aren't [those risks not mentioned] covered under these policies?

   All of the risks are covered in some manner.

   i.      What are the significant inhibitors to covering these risks?

         No answer.

   ii.     Do you know of any companies covering these risks?

         No answer.

   Hi.    What needs  to be changed, by EPA or other parties, to enable the coverage
         of these risks?

         No answer.

   iv.    What needs  to be changed, by EPA or other parties, to lower the cost of
         covering these risks?

         No answer.

                                 A2  - 3

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American International Group

   C. What would be the estimated amount of time needed to develop and market
      coverage of these risks, inception-to-market time?

      The development can take a long time. For example, value diminution is very
      difficult to calculate.

   D. Do you know of any other companies developing or selling these policies?

      No answer.

III.   How can EPA encourage or develop incentives for the use of these types of
      risk transfer mechanisms?

     Make it easier for the underwriter by encouraging such common sense
      approaches as the RBCA standards.

     Make it known that insurance is out there and can make investors more
      comfortable.

     Legislate requirements for the use of these types of  financial assurance
      mechanisms for some transactions.
                                   A2  - 4

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                                                                        ECI Inc.
  COMPANY:  ECI Inc.
  IDUSTRY:   Underwriter/Broker
I.  Do you have policies in existence or in development?

   Yes.

II. What is the coverage of these policies?

   A. Do these policies cover commercial or single-family properties?

      We cover only commercial properties at this time, but have plans to develop
      similar policies for single-family properties.

   B. What risks are you covering?

      All of the risks can be covered in some way. For the risks of value impairment
      and taking, however, there must be very clear evidence proving the impairment
      and/or taking was caused by the insured property. Nuisance would be covered
      if it was connected to the release of contaminants.

      L     What is the scope of coverage for these risks?  Maximum coverage,
            deductible, etc.?

            The scope of coverage is commonly $1 million to $5 million. The
            maximum has been around $15 million, but I have seen coverage for as
            low as $100,000  (however, at this level, the cost per dollar of coverage is
            more expensive).  The amount of coverage varies greatly with the type of
            property covered. For example, an office building would require a
            smaller amount of coverage.

      ii.    What are the underwriting criteria for covering these risks?

            Once again, this depends significantly on the historical use of the
            property.  We usually require a regulatory records check, a baseline
            environmental survey, a Phase I, a compliance audit, a review of use of
            neighboring  properties, and a review of whether the site must comply
            with RCRA, TRI, etc.
                                   A2 -  5

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ECI Inc.

      Hi.   What is the demand trend for insuring these risks?

            I have seen the demand greatly increase, but I have only been writing
            these policies for three to four months so I cannot give a longer trend
            description. We have seen an increase in demand for coverage of small to
            mid-size industrial properties,  and on the low end coverage such as office
            buildings.

      iv.   How many policies have you sold?

            I have no specifics, but less than 100.

      v.    Are the trends different in certain states (i.e., have state laws affected the
            demand for these policies) ?

            In general, I believe that voluntary clean-up programs and the RBCA
            standards in states have increased the demand for insurance policies.
            However, I have seen a decrease in the potential demand in states where
            there are more stringent administrative requirements for voluntary clean-
            up of sites. Many people do not want to go through this administrative
            "red tape." (He did not give any specific states where this has happened.)

      vi.   What are the costs (i.e., premiums) for covering these risks?

            I have seen costs as high as $100,000 per million in coverage and as low as
            $400 per million in coverage (this was for such properties as office
            buildings). A premium of $15,000 to $20,000 per million in coverage is the
            high average, with $5,000 per million in coverage being the most common.

      vii.   Do the relative costs of covering these risks increase as the value of the
            insured property decreases?  If so, what needs to change for the relative
            costs to remain constant?

            I really do not think the cost of insurance policies is a concern. I have not
            seen any relative cost problems.

   B. Why aren't [those risks not mentioned] covered under these policies?

      No answer.
                                    A2  -  6

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                                                                        ECI Inc.

      i.     What are the significant inhibitors to covering these risks?

            No answer.

      ii.    Do you know of any companies covering these risks?

            No answer.

      Hi.    What needs to be changed, by EPA or other parties, to enable the coverage
            of these risks?

            No answer.

      iv.    What needs to be changed, by EPA or other parties, to lower the cost of
            covering these risks?

                 Do not require too many legal hoops to jump through for property
                  cleanup and liability issues.

                 Ensure a continuity of land use type (any changes in land use can
                  throw kinks into the process).

                 Allow insurance market competition only; this will bring the costs
                  down.

   C. What would be the estimated amount of time needed to develop and market
      coverage of these risks, inception-to-market time?

      No answer.

   D. Do you know of any other companies developing or selling these policies?

      No answer.

III.   How can EPA encourage or develop incentives for the use of these types of
      risk transfer mechanisms?

   There are a number of things to pursue:

     Use financial responsibility requirements to ensure use of these policies.

     Take on an educational function. There is substantial misunderstanding of what
      products are available.


                                   A2 -  7

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ECS
  COMPANY: ECS
  INDUSTRY: Underwriter/Broker
I.  Do you have policies in existence or in development?

   Yes.

II. What is the coverage of these policies?

   A. Do these policies cover commercial or single-family properties?

   Our policies cover only commercial properties.

   B. What risks are you covering?

   All risks on the list (the risks as described in Section LA.) can be covered. Value
   impairment, although potentially covered, may not be covered if there is a known
   stigma attached to the property, such as being listed on CERCLIS.

      i.     What is the scope of coverage for these risks? Maximum coverage,
            deductible, etc.?

            The maximum limit is about $60 million, but the market has seen up to
            $100 million.  Coverage below $200,000 is not practical at this time, at least
            by larger insurance companies, because the premiums do not
            comparatively decrease below this amount.  The deductibles range from
            $25,000 to $500,000.

      ii.     What are the underwriting criteria for covering these risks?

            We look at financial information for the past 2-3 years as well as an
            engineering report (sometimes the insurance company will complete this
            report for free).

      Hi.    What is the demand trend for insuring these risks?

            With increasing focus on brownfields, we are just now seeing an increase
            in activities and voluntary cleanups, which is increasing demand for
            insurance. After the inception of the Brownfields program in January of
            1995, there was a slight lag-time, and then there was about a  15 to 20
            percent increase in demand. The Brownfields program sparked this
            increase because these properties were now in the public eye and had a
                                    A2  -

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                                                                         ECS

         name attached to them. In addition, local governments were getting
         anxious to get these properties back on the tax roll.

   iv.    How many policies have you sold?

         Last year we sold about $200,000 in premiums covering these risks.
         Overall, we have about 25,000 clients covered for parts of these risks.

   v.     Are the trends different in certain states (i.e., have state laws affected the
         demand for these policies) ?

         States that have very active voluntary cleanup programs have greater
         demand,  such as Pennsylvania, Illinois, Indiana, Michigan, Ohio,
         California, Louisiana, and Texas.  For example, Pennsylvania has made
         clear its desire to do business on these properties.  They have a fast track
         for preparation and help design cleanup plans.

   vi.    What are the costs (i.e., premiums) for covering these risks?

         Premiums range from $10,000 up  to $200,000 to $300,000  per million of
         coverage. An example is a policy that covers first and third party liability
         at $1 million in coverage for 3 years. This policy would cost between
         $12,000 and $15,000 (if the deductible was between $30,000 to $40,000).

   vii.   Do the relative costs of covering these risks increase as the value of the
         insured property decreases? If so, what needs to be changed for the
         relative costs to remain constant?

         I have not viewed this question quite the way you have it phrased. What
         prevents  the purchase and redevelopment of properties are other costs
         such as deductibles and fixed costs. Depending on the condition of the
         property  (and thus the amount  of these costs), purchasing the property
         may be worth the costs.

B. Why aren't [those risks not mentioned] covered under these policies?

   We have not been asked to cover the costs of Risk #5, payment due to nuisance
   caused, under value impairment.  First-party diminution is not widely available,
   but third-party diminution has been covered, and is currently being improved.
   There really aren't any other risks missed or not covered. However, high-level
   radiation is one  type of contaminant that is not covered.

   i.      What are the significant inhibitors to covering these risks?
                                 A2  -  9

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ECS

            There aren't really any inhibitors for value impairment, or diminution, but
            high-level radioactivity is too costly to cover.

      ii.    Do you know of any companies covering these risks?

            No answer.

      Hi.    What needs to be changed, by EPA or other parties, to enable the coverage
            of these risks?

            No answer.

      iv.    What needs to be changed, by EPA or other parties, to lower the cost of
            covering these risks?

            No answer.

   C. What would be the estimated amount of time needed to develop and market
      coverage of these risks, inception-to-market time?

      It takes a few weeks to a few months, depending on state legal requirements and
      paperwork, such as the forms approval process. The average time for
      development is probably about six months.

   D. Do you know of any other companies developing or selling these policies?

      No answer.

III.   How can EPA encourage or develop incentives for the use of these types of
      risk transfer mechanisms?

   Education, education, education!!  Many of the key players are not aware of the
   availability and coverage of these policies. Many of your non-traditional sources of
   funding are part of this unknowledgeable group. Beyond just education, EPA needs
   to recommend the mechanisms to all players involved.
                                  A2  -  10

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                                                            Environmental Warrantee
  COMPANY: Environmental Warrantee
  INDUSTRY: Underwriter/Broker (for AIG)
I.  Do you have policies in existence or in development?

   Yes.

II. What is the coverage of these policies?

   A. Do these policies cover commercial or single-family properties?

   Our company covers only commercial properties, but we are putting together
   similar single-family policies.

   B. What risks are you covering?

      Policies cover unknown contamination. Known contamination can be factored
      into properties through adjusted purchase price, adjusted financing, and reserve
      funds.

      Policies started with an exclusion of known contamination and covered only
      first-party (because no one knew what third-party suits might include). In
      addition the policies covered only the said property, not surrounding properties.

      Policies now include third-party and off-site lawsuits for most of the risks
      remediation, value impairment, and personal injury (those not included will be
      mentioned later).

      L     What is the scope of coverage for these risks? Maximum coverage,
            deductible, etc.?

            The scope of coverage varies greatly with the underwriting criteria. There
            is no maximum coverage or standard deductible. However, the low side
            of coverage is usually around $1 million, and the high side of coverage is
            around $40 million, with an average of $2 million to $5 million. Although
            the minimum coverage is currently $1 million, Environmental Warranty is
            developing two new policies with coverage from $250,000 to $500,000, and
            $500,000 to $1 million.

            The deductibles range from $10,000 to $100,000, with 8 out of 10 policies
            written with a deductible in the $25,000 to $50,000 range.

      ii.    What are the underwriting criteria for covering these risks?

                                   A2  -  11

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Environmental Warrantee

            Underwriting criteria were very stringent in the past, requiring extensive
            due diligence. As insurance companies have become more comfortable
            with the risks, these criteria have begun to relax.

      Hi.   What is the demand trend for insuring these risks?

            Demand has increased greatly for these policies. Since last July and
            August, we have seen a 300 to 400 percent increase in demand for these
            policies. The reason for this dramatic increase is based on three things:

                 Environmental Warrantee moved away from their original carrier
                  (SafeCo) to two other carriers (Zurich American and AIG) which
                  caused the submission acceptance to go way up (the two new
                  carriers are more willing to cover risks).

                 The underwriting of policies in general has broadened coverage.

                 The market is finally waking up with more refinancing, more
                  securitization work, and lenders requiring insurance on collateral
                  properties.

      iv.   How many policies have you sold?

            During  the period from January 1990 to January of 1995, we sold about 50
            policies, while we have sold 20 policies during the last 2 months.  Over the
            next year we expect to sell between 200 to 225 policies.

      v.    Are the  trends different in certain states (i.e., have state laws affected the
            demand for these policies) ?

            The demands for these policies are more lender driven. We have not seen
            any states where the demand is significantly different than other states.

      vi.   What are the costs (i.e., premiums) for covering these risks?

            The costs of covering these risks has gone through the floor.  Three years
            ago, the cost for simple coverage of a $1 million policy was $10,000.
            Today, the cost for the same policy is $5,000.

      vii.   Do the relative costs of covering these risks increase as the value of the
            insured property decreases? If so, what needs to change for the relative
            costs to remain constant?
                                   A2  -  12

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Environmental Warrantee

            Using the minimum value of property as an excuse that it is too expensive
            to buy coverage is not a good excuse. Cost is only an easy excuse. We
            know of many lenders that incorporate the cost of the policies into the
            loans.

   B. Why aren't [those risks not mentioned] covered under these policies?

      Risk # 5, payment required because of nuisance caused, is a question. I guess
      that third-party lawsuits based on nuisance would not be covered.

      Risk # 6, payment required because of decrease of property equity, can't really be
      covered. The erosion of equity problem is based on "says who" criteria. There
      are just too many opinions on how much, and why equity has eroded.

      All value impairment risks are nearly impossible to insure. The ability to define
      perception has too many variables.  For example, the Federal or state
      governments may change their minds on liability.  Even with a letter of closure,
      there is always that "but we reserve the right" clause.

      L     What are the significant inhibitors to covering these risks?

            Covered above.

      ii.    Do you know of any companies covering these risks?

            I don't know of any companies covering these risks.

      Hi.   What needs to be changed, by EPA or other parties, to enable the coverage
            of these risks?

            I cannot think of anything.

      iv.    What needs to be changed, by EPA or other parties, to lower the cost of
            covering these risks?

            Some covered below.
                                   A2  -  13

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Environmental Warrantee

   C. What would be the estimated amount of time needed to develop and market
      coverage of these risks, inception-to-market time?

      No answer.

   D. Do you know of any other companies developing or selling these policies?

      No answer.

III.   How can EPA encourage or develop incentives for the use of these types of
      risk transfer mechanisms?

   There are several things EPA can do:

     Develop a pilot program to encourage use of policies

     Decide what lending authorities need to be involved

     Develop a private sector task force with Financial Accounting Standards Board
      (EASE) for example

     Mandate these insurance policies

     Make these policies as universal as title insurance - simple

     Keep a property closed when you close a property

     Endorse the usage of these policies.
                                   A2 -  14

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                                                                   The Eric Group
  COMPANY:  The Eric Group
  INDUSTRY:  Underwriter/Broker (for Zurich)
I.  Do you have policies in existence or in development?

   Yes.

II. What is the coverage of these policies?

   A. Do these policies cover commercial or single-family properties?

      The policies cover only commercial properties at this time.

   B. What risks are you covering?

      We cover most risks as listed on the  predeveloped risk list (the risks as described
      in Section I.A.).  Risks such as pre-existing, undetected/undiscovered, and on-
      going.  Some common types include property transfer insurance, bodily injury
      from contamination, post-remediation insurance, and remediation stop-loss to
      cover remediation cost overruns.

      i.     What is the scope of coverage for these risks? Maximum coverage,
            deductible, etc.?

            Maximum coverage is typically around $10 million, with the minimum
            usually around $1 million.  Coverage can potentially go as low as the
            insured wants, but there is a minimum on cost or premiums regardless of
            how low the coverage is. For example, if someone wanted insurance
            coverage for $500,000 in cost overrun of known contamination, the
            premium would only be slightly less than coverage for $1 million. On the
            other hand, if someone wanted coverage for $500,000 for unknown
            contamination, the premium would be significantly less than policy
            coverage for $1 million. The deductible varies with the type of coverage,
            but usually has a minimum of approximately $10,000 with a typical
            amount of $50,000.

      ii.    What are the underwriting criteria for covering these risks?

            We require a Phase I audit for most cases, remediation papers, and other
            checks  and measures
                                   A2  - 15

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The Eric Group
Hi.  What is the demand trend for insuring these risks?

            Demand has been a flat curve until about July 1995. Since then, the
            demand has increased 200 percent. Most of this increase has been due to
            Eric Group's expansion of coverage last May. We are also looking for a
            great increase in 1996 as many property portfolios are coming in.

      iv.   How many policies have you sold?

            We have sold over 1,000 policies covering environmental risks. The
            policies provide coverage to over $2 billion worth of securitized mortgage
            transactions. The total value of real estate covered is probably over $5
            billion.

      v.    Are the trends different in certain states (i.e., have state laws affected the
            demand for these policies) ?

            We have not seen a big difference among states, but Illinois, Ohio,
            Minnesota, New Jersey, Massachusetts, and Pennsylvania have all done a
            great job of encouraging redevelopment by relaxing risk-based cleanup.

      vi.   What are the costs (i.e., premiums) for covering these risks?

            The premiums vary by risk and not size or value of the property. Cost for
            a 5-year policy in coverage is commonly around $10,000, and can go up to
            $100,000.  For $2 million in coverage, the premiums range from $10,000 to
            $25,000 for most policies. For $5 million in coverage, the premiums range
            from $15,000 to $50,000.

      vii.   Do the relative costs of covering these risks increase as the value of the
            insured property decreases? If so,  what needs to change for the relative
            costs to remain constant?

            Yes, small properties have a higher relative premium. Premiums usually
            bring the value of the property back into the playing field, level with
            "greenfields." When the deal makes sense, premiums are not a concern.

    B. Why aren't [those risks not mentioned] covered under these policies?

      Risks on properties that have not been remediated, and where there is
      unresolved remediation are not covered.  The property owner needs to either
      remediate or complete closure of a site.
                                   A2  -  16

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                                                        United Coastal Insurance

   Risk #4, legal fees under remediation-based risk, is not covered at this time, but
   could easily be covered.

   Risk #5, payment required because of a nuisance, could be covered if a judgment
   was lawfully claimed.

   Risk # 6, payment required because of decreased equity, is not currently covered,
   but I  am sure models could be developed.

   Value Impairment is not covered at this time but is probably calculable. We
   would need to know (1) how often something happens, and (2) how much it
   costs to get it done. I would be very interested in developing this type of policy.

   L     What are the significant inhibitors to covering these risks?

         The major inhibitor is undefined risks of EPA liability.

   ii.     Do you know of any companies covering these risks?

         I don't know of any companies covering these risks.

   Hi.    What needs to be changed, by EPA or other parties, to enable the coverage
         of these risks?

         Regulations need to be reasonable regarding remediation policies, and
         EPA needs to be firm on going further with liability, such as re-openers,
         even though we can deal with re-opener clauses to a certain extent.

   iv.    What needs to be changed, by EPA or other parties, to  lower the cost of
         covering these risks?

         There is nothing EPA can do to lower these costs, but they do need to be
         at the table to clarify things.

C. What would be the estimated amount of time needed to develop and market
   coverage of these risks, inception-to-market time?

   The usual amount of time needed  is about 1-2 years for development.

D. Do you know of any other companies developing or selling these policies?

   No answer.
                               A2 -  17

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The Eric Group

III.   How can EPA encourage or develop incentives for the use of these types of
      risk transfer mechanisms?

     The Federal government should not be in the insurance business. However,
      HUD and DOC may have an interest in encouraging the use of these policies.

     EPA needs to provide a mechanism to require and allow the use of public
      funding for insurance premiums.

     EPA should make sure all parties involved in property transactions are aware of
      the availability of insurance.

     EPA should use incentives to encourage the use of insurance. For example, if
      insurance is in place on a property, EPA should relax certain procedures.
                                   A2  -  18

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                                                           United Coastal Insurance
  COMPANY: United Coastal Insurance
  INDUSTRY: Insurer
I.  Do you have policies in existence or in development?

   Yes.

II. What is the coverage of these policies?

   A. Do these policies cover commercial or single-family properties?

      The policies cover only commercial properties at this time.

   B. What risks are you covering?

      Our company covers unknown contamination. In situations where the
      contamination is known, there is a purchaser/seller indemnification agreement
      where the purchaser sits behind this agreement and the seller may purchase a
      policy.

      i.     What is the scope of coverage for these risks? Maximum coverage,
            deductible, etc.?

            We can cover liability above certain levels of known contamination, up to
            $10 million. The coverage can go as low as $250,000. The scope of
            coverage really depends on the underwriting criteria.

      ii.    What are the underwriting criteria for covering these risks?

            The criteria includes: assessment of on-site management and
            environmental practices, such as controls and safety measures;
            assessment of all hazards on-site and on surrounding sites such as number
            of USTs, the site's listing on CERCLIS, the site's requirements under
            RCRA, and whether the site is considered a large quantity generator. In
            addition, we look for ground water and surface water problems.

      Hi.    What is the demand trend for insuring these risks?

            The demand is high, but it has not been purchased a lot because costs are
            still too high. However, we have seen about a 15-20 percent increase in
            demand for these policies over that past year (no specific month of upturn
            was identified). This increase was attributed to the fact that lenders,


                                   A2 -   19

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United Coastal Insurance

            buyers/sellers, and municipalities are requiring use of insurance policies
            for real estate transactions.

      iv.    How many policies have you sold?

            This information is proprietary.

      v.    Are the trends different in certain states (i.e., have state laws affected the
            demand for these policies) ?

            The Transfer Act in New Jersey emphasizes site assessment and sheds
            more light on liability.

      vi.    What are the costs (i.e., premiums) for covering these risks?

            The costs are relatively expensive, but I cannot give specifics.

      vii.   (Question was not included on this interview.)

   B. Why aren't [those risks not mentioned] covered under these policies?

      They are not covered due to the risks of third-party liability.

      i.     What are the significant inhibitors to covering these risks?

            It is difficult to define the potential liability.

      ii.    Do you know of any companies covering these risks?

            No answer.

      Hi.    What needs to be changed, by EPA or other parties, to enable the coverage
            of these risks?

            EPA needs to do more to clarify the liabilities of property purchasers.

      iv.    What needs to be changed, by EPA or other parties, to lower the cost of
            covering these risks?

            EPA needs to seek out more PRP's, use joint and several liability, and
            relax and/or revamp many of the cleanup laws. It is too big an issue to
            define clean when it is very dependent on the desired use of the property.
                                    A2  - 20

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                                                           United Coastal Insurance

   C. What would be the estimated amount of time needed to develop and market
      coverage of these risks, inception-to-market time?

      No answer.

   D. Do you know of any other companies developing or selling these policies?

      No answer.

III.   How can EPA encourage or develop incentives for the use of these types of
      risk transfer mechanisms?

     (Could) Require policies.

     Distribute materials on the risks, and the policies that are available to cover the
      risks.

     Develop indemnification/protection on Brownfields for third-party lawsuits.
                                   A2  - 21

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Willis Corroon
  COMPANY: Willis Corroon Environmental Risk Management Services
  INDUSTRY: Broker
I.  Do you have policies in existence or in development?

   Yes.

II. What is the coverage of these policies?

   A. Do these policies cover commercial or single-family properties?

      Our policies cover only commercial properties.

   B. What risks are you covering?

      If you can get a permit to do it, you can insure it.  All of the risks, such as fines,
      penalties, punitive damages, non-compliance lawsuits, value impairment, can be
      covered in some way.

      i.     What is the scope of coverage for these risks? Maximum coverage,
            deductible, etc.?

            There is a minimum premium which does  not really decrease with
            anything below $1 million in coverage. There have been very few policies
            written for $500,000 in coverage, but most brokers do not want to deal
            with anything less than $1 million.

      ii.    What are the underwriting criteria for covering these risks?

            No answer.

      Hi.    What is the demand trend for insuring these risks?

            I do not have a specific percentage of increase, or date when the increase
            started, but there have been more inquiries on these insurance policies
            over the past month than there has been over the past five years.  The
            reason for this has been EPA encouragement of brownfields
            redevelopment and the Brownfields Program.  RBCA standards are
            making real cleanup feasible for the first time.

      iv.    How many policies have you sold?

            No answer.

                                   A2 -  22

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                                                                Willis Corroon

   v.     Are the trends different in certain states (i.e., have state laws affected the
         demand for these policies) ?

         No answer.

   vi.    What are the costs (i.e., premiums) for covering these risks?

         A standard premium is not easily identified, but remediation stop-loss is
         being pushed to under 10 percent of the coverage. Minimum premiums
         are around $10,000 for a million in coverage.

   vii.   Do the relative costs of covering these risks increase as the value of the
         insured property decreases? If so, what needs to change for the relative
         costs to remain constant?

         I do not think $10,000 is a deal-breaker for properties with little value.  If
         the cost of cleanup is upside down, in other words the costs are more than
         the value of property at its highest use, the deal will not go through
         anyway.

B. Why aren't [those risks not mentioned] covered under these policies?

   No answer.

   i.     What are the significant inhibitors to covering these risks?

         No answer.

   ii.     Do you know of any companies covering these risks?

         No answer.

   Hi.    What needs to be changed, by EPA or other parties, to enable the coverage
         of these risks?

         No answer.

   iv.    What needs to be changed, by EPA  or other parties, to lower the cost of
         covering these risks?

         No answer.
                                A2  - 23

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Willis Corroon

    C. What would be the estimated amount of time needed to develop and market
      coverage of these risks, inception-to-market time?

      No answer.

    D. Do you know of any other companies developing or selling these policies?

      The big companies offering these policies are Environmental Warrantee, ECS,
      Zurich American, and American International Group. These are the leaders in
      this type of insurance. The others are followers.

III.   How can EPA encourage or develop incentives for the use of these types of
      risk transfer mechanisms?

    Policies are not being used because, for many sites, there is no or little information.
    Second, there is a lack of knowledge about these types of policies in the
    marketplace.  EPA needs to make more information available through literature on
    these policies and how they work.
                                   A2  - 24

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                                                                  Zurich American
  COMPANY: Zurich American Insurance Group
  INDUSTRY: Insurer
I.  Do you have policies in existence or in development?

   Yes.

II. What is the coverage of these policies?

   A. Do these policies cover commercial or single-family properties?

      Our policies cover commercial properties, but they can be geared for single-
      family properties if requested. However, the answers in this interview are based
      on commercial property.

   B. What risks are you covering?

      All of the risks on the list are covered, at least to a certain extent. For example,
      the coverage of consultant and lawyer fees to meet government regulations is
      covered to the extent that it is included in legal defense. If one wanted to go
      beyond compliance, it would not be covered.

      L     What is the scope of coverage for these risks? Maximum coverage,
            deductible, etc.?

            The scope of coverage varies widely, up to about $10 million in risk
            transfer capacity.  I can not give a definite range for the coverage, but I
            have seen it as low as $500,000, with the most commonly requested
            coverage at $1 million.  However, there really is no set minimum except
            for the fact that as the coverage amount decreases, the cost per dollar
            covered increases.  The deductible is really only a tool that makes sure the
            insured is taking part of the risk, which will then vary on the soundness of
            the business deal.

      ii.    What are the underwriting criteria for covering these risks?

            We look first for a detailed engineering report of the site.  The key
            underwriting criteria, however, is to look at the soundness and business
            sense of the property transaction. What are the fundamentals of the
            project, and is its proposed use going to cover the costs of remediation,
            enough to be profitable.

      Hi.    What is the demand trend for insuring these risks?

                                   A2 -  25

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Zurich American
            The demand is greatly increasing. The talk and focus by EPA, states, and
            localities has been a big help in driving up this demand, as well as the
            time and energy spent by Zurich American promoting our policies.
            Specifically, the increase in demand has only been in the form of inquiries,
            and not in actual policies sold.

      iv.    How many policies have you sold?

            We have been involved in several hundred commercial real estate deals
            over the past 3 years.

      v.    Are the trends different in certain states (i.e., have state laws affected the
            demand for these policies) ?

            We have not sold enough policies across all states to make an informed
            answer to this question. I do think that there are a number of states in the
            Midwest that have put a substantial effort into their brownfields
            programs.

      vi.    What are the costs (i.e., premiums) for covering these risks?

            The costs vary widely.  I cannot give a definite range, but I have seen
            some policies go for $10,000 or less per million of coverage, while some
            other policies have gone for a few million.  There are too many variable to
            give a range or average.

      vii.   Do the relative costs of covering these risks increase as the value of the
            insured property decreases? If so, what needs to change for the relative
            costs to remain constant?

            There are properties where the cost of remediation, or the risks of these
            costs, can far exceed the potential value of the property. However,
            insurance is not going to help redevelop these properties. These
            properties can only be redeveloped if the redevelopment makes sound
            business sense. If it does not, insurance will not be provided.  These
            properties will only be redeveloped if subsidies are provided by the
            government, or if they are redeveloped directly by the government. For
            most properties that do make good business sense, the cost of insurance
            has not been an issue.
                                   A2 -  26

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                                                                 Zurich American

   B. Why aren't [those risks not mentioned] covered under these policies?

      There really are no risks that cannot be covered. There are only limits to most of
      these risks, such as some types of contamination that will not be covered, as well
      as some properties that have certain manufacturing histories.

      L     What are the significant inhibitors to covering these risks?

            No answer.

      ii.    Do you know of any companies covering these risks?

            No answer.

      Hi.    What needs to be changed, by EPA or other parties, to enable the coverage
            of these risks?

            No answer.

      iv.    What needs to be changed, by EPA or other parties, to lower the cost of
            covering these risks?

            No answer.

   C. What would be the estimated amount of time needed to develop and market
      coverage of these risks, inception-to-market time?

      Development can be about as fast as we want it to be. If the deal is right, and the
      demand for coverage is there, the time-frame can be quite short.

   D. Do you know of any other companies developing or selling these policies?

      No answer.

III.   How can EPA encourage or develop incentives for the use of these types of
      risk transfer mechanisms?

     There is talk and movement currently on secured creditor exemptions for
      liability.  There needs to be this same type of exemption for insurance companies
      who could potentially be considered owner/operators of properties, and thus
      could be held liable for costs
                                   A2  -  27

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Zurich American
      they were not responsible for initially. There are several cases out there right
      now which deal with these issues (i.e., Tiger vs. Tiger).

      EPA needs to educate the public, developers, lenders, and purchasers on why
      and how this redevelopment process happens. By shedding light on problems,
      frivolous litigation can be averted. These groups need to have a clear picture
      from EPA on the evaluation of property, and the liability that exists, both state
      and Federal, even if a property has been closed. From this understanding, EPA
      needs to make it clear why redeveloping potentially contaminated properties is a
      priority, ways this is being done now, and how other mechanisms can be used in
      the future to facilitate redevelopment (such as insurance).

      Clarify the goals of Federal programs, such as Brownfields, and build a legal
      framework into these goals. For example, when EPA is required to "re-open"  a
      closed property, loan funds should be provided for the additional costs.
                                   A2 -  28

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