EDR Insight Webinar Wednesday, October 1, 2014

1. Smart Data. Smarter Workflow.
Lender Essentials: Environmental Liability Insurance
Presented by:
• Mike Herrmann, Legacy Risk Solutions, LLC
• Canaan Crouch, P.G., Legacy Risk Solutions, LLC
• Debra Hausser, AVP – Financial Institutions Leader, Zurich North
America
Moderated by:
• Dianne Crocker, Principal Analyst, EDR Insight
October 1, 2014

2. INTRODUCTION
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Today’s Webinar will be presented by the following environmental
insurance experts:
Michael Herrmann: Legacy Risk Solutions, LLC
Canaan Crouch: Legacy Risk Solutions, LLC
Debbie Hausser: Zurich Environmental

3. Agenda
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 Overview: Why We Are Here
 Misunderstandings about Lender Environmental
Insurance
 Key Components of Environmental Risk
Management
 Essentials of Environmental Insurance
 Example Transactions and Observations Post
Financial Crisis
 Questions

4. Environmental Risk Management
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Misunderstandings about lender
environmental insurance:
 Lender insurance is a replacement for lender due diligence.
 Due diligence and risk mitigation provide risk transfer.
 Environmental insurance coverage is cost prohibitive.
 Insurance companies do not pay claims.

5. What is Risk Management (Cont’d)?
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Key Components of Environmental Risk Management:
 Risk Identification
o Identification of business risk.
 Risk Avoidance
o Avoidance of adverse business risk.
 Risk Mitigation
o Action steps conducted to directly address business risk (i.e., escrow
agreements, carve outs, engineering or institutional controls,
operational policies/procedures, etc.)
 Risk Transfer
o Risk not addressed by avoidance or mitigation may be transferred by a
contract or insurance policy.

6. ZURICH NORTH AMERICA
LENDER ENVIRONMENTAL COLLATERAL
PROTECTION & LIABILITY INSURANCE
Debra Hausser
AVP - Financial Institutions Leader
Zurich Environmental Site
Please refer to policy for complete explanation of coverage

7. © Zurich -
Environmental Risks in Lending
The risk of environmental loss for a lender can be incurred
in several ways.
 Loss of collateral value
 Liability for cleanup costs on foreclosed/owned properties
 Third party liability for bodily injury and property damage
including defense costs
 Loss of the CERCLA secured creditor exemption
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8. © Zurich -
Target Customers
 Banks
 Savings & Loans Companies
 Credit Unions
 Life Insurance Companies
 Pension Funds
 Loan Originators
 Other Financial Institutions which hold or invest in
commercial real estate backed loans
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9. © Zurich -
Lender Policy – Coverage Parts
Coverage A - Collateral Value Protection
- two triggers: Default and Pollution event
Coverage B - First Party Cleanup
Coverage C - Third Party BI/PD Liability including defense
costs
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10. © Zurich -
When do Lenders use this
insurance: Individual Transaction
Individual Transaction
 Used when there is an environmental concern
 Used in lieu of financial guaranty or escrow
 Used when short turn-around time
Benefits of an Individual Transaction policy
 Tool to help lenders get comfortable with the
environmental risk on the property.
 Offers the lender a lower cost option to present to their
borrower to address the environmental concern.
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11. © Zurich -
When do Lenders utilize this insurance:
Portfolio Program
Portfolio Program
 Used as a risk management tool
 Minimum volume requirement: 25 loans per year
 Eligible property types: Commercial Real Estate properties
Benefits of a Portfolio Program:
 Provides lender with a true risk transfer mechanism for their environmental
exposures
 Consistent approach to environmental risk management
 Insurance will pay for a covered loss associated with a pollution event
 Streamlines the loan process
 Reduce cost
 Provides lender with a competitive advantage
 Provides cash flow management in the event of a claim
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12. © Zurich -
Examples and Trends Post Financial
Crisis
Example Lender Insurance Transactions
Active dry cleaner
Historic gas station location
Apartment complex
Claims Examples
Watercraft sales facility
Auto repair facility
Observations on lender insurance since the financial crisis
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13. Debbie Hausser
QUESTIONS?
Michael Herrmann, P.G.
Canaan Crouch, P.G.
Direct: 303-224-4071
Email: debra.hausser@zurichna.com
Website:
www.zurichna.com/environmental
Michael Herrmann 303-728-9228
mherrmann@legacy-rs.com
Canaan Crouch 310-804-7167
ccrouch@legacy-rs.com
Website: www.legacy-rs.com
www.legacy-rs.com/lender
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