Environmental Insurance available in Brazil Patrícia Godoy Oliveira

Overview of Environmental Insurance Market in Brazil R$ 68,625,663 in Premiums Issued 13 insurers authorized to operate 4 insurers selling 9 insurers selling only Environmental risks for marine and multinational programs 62% of the premium with two carriers Claims ratio: 30% *Source Susep - 2017

Overview of Environmental Insurance Market in Brazil Before 1981 There was no exclusion for pollution risks in the General Liability policies 1981 – 1998 Consolidation of environmental laws in Brazil 2004 - 2005 Unibanco AIG launches the first policy for Environmental insurance, but only 20-25 policies were sold during this time

Overview of Environmental Insurance Market in Brazil 2008 End of Reinsurance monopoly, creating incentives for insurers to further develop their technical areas in search for more specialization and launching of new products 2010 Effectiveness of National Policy for Solid Waste Increase in liability an exposure of clients with new opportunities for carriers Insurers respond with more comprehensive products (ACE, Itaú, AIG, Liberty) 2013 - 2015 Large claims involving the environment, human losses and extensive media coverage

Environmental Insurance Policies in Brazil Scope of Coverage • To the insureds: clean up, mitigating costs, defense costs, business interruption (coverage may partially exist in other policies) • To third parties: individuals or collective, monetary damages in general • To the environment – reparation / recovery Claims Made Policies, with possible retroactive date

Environmental Insurance Policies in Brazil Purchasing process • Long process between first visits to potential insureds and actual purchase: Awareness of risk / lack of knowledge Determination of amounts Lack of budgeting • Costly process for prospect client – Asymmetry of information: Environmental impact reports: Phase 1 and phase 2 Insurance carrier may request more details Risk Questionnaire May already incurred by client in the event of M&A, governmental licensing requests or Internal Controls policies • Determination of limits: recently we have seen R$ 10M to R$ 20M • Banks may serve as catalysts (BNDES, for instance)

Environmental Insurance Policies in Brazil Environmental Insurance Policy Sudden Pollution Clause (General Liability Insurance) Covers sudden and gradual pollution (no time limit) Only covers sudden events (that last a maximum of 72 hours) Includes damage suffered by insured (On/Off-Site) Coverage limited to monetary damages of third parties (Off-Site – third party) Covers damages to natural resources: seas, rivers, forests, atmospheric emissions Does not cover damages to natural resources Covers defense costs, investigations and remediation steps Only covers defense costs Events covered include those below water or soil level Events covered are limited to those of equipment located at water or soil level or above

Environmental Insurance Policies in Brazil Additional Coverage: co-liability for disposal and treatment sites Environmental agency charges clients Disposal and treatment sites may not have financial capacity to pay all remediation costs Leachate infiltration in soil and water table

Environmental Insurance Policies in Brazil Main express exclusions in local policies Punitive damages / penalties; Contractual obligations; Undergroud tanks; Non-fulfillment of laws; Internal expenses that are not authorized by carrier; Asbestos and lead; Employers’ liability; Events previously known (not declared to carrier); Significant change in use; Microbial material; Events due to radiation; Sites previously occupied by insured (where pollution started after site has been sold or vacated). Criminal Defense Costs – strict liability?

Environmental Insurance available in Brazil High cost for remediation of soil and water table Legal Departments get involved / promote the purchasing of policies Bill of law being discussed in Senate to make environment insurance mandatory for certain activities Environmental insurance = Risk mitigation, Loss prevention and business continuity plan Growing Market

Environmental Insurance available in Brazil Thank you! Patrícia Godoy Oliveira VP Legal & Compliance Aon Brazil Patricia.godoy@aon.com