Environmental Insurance Expected to Grow

CHICAGO-Charles L. Perry Jr. can envision a day not too far off when environmental insurance bought at the closing table is as commonplace as title insurance policies are today in commercial real estate transactions. The president and CEO of West Hartford, CT-based Environmental Warranty Inc. told lenders at the commercial and multifamily administrative conference of the Mortgage Bankers Association of America Thursday that environmental insurance already outweighs the cost of conducting due diligence on a property.

“In two to three years, you’re not going to go to a commercial real estate closing and see someone produce a Phase I environmental report, just as today you’re not going to see someone produce a title search or an abstract,” says Perry, whose firm is an insurance underwriter brokerage working with lenders, owners, buyers, securitizers, investors and REITs.

Perry says the upfront premium for environmental insurance can be 30% more than the cost of a Phase I study. Premiums can cost $1,200 for $1 million in insurance and up to $3,000 for $5 million to $10 million in coverage.