Guy Carpenter and Verisk highlight emerging PFAS risks in Europe

A joint report by Guy Carpenter and Verisk explores the liability risks associated with per- and polyfluoroalkyl substances (PFAS), along with process trends, regulatory developments and modeling approaches for insurers.

The report highlights how Verisk Liability Analytics, in collaboration with Guy Carpenter, developed a model to assess PFAS liability exposure in Germany, France and Belgium. This model provides the reinsurance industry with an initial quantification of potential liability losses, reflecting growing concerns about PFAS as an emerging risk.

Emerging risks, including unforeseen events that could have significant impacts on liability portfolios, are a key area of ​​focus for reinsurance and insurance companies. PFAS, also known as ‘forever chemicals’, are synthetic substances that raise major concerns due to their potential effects on human health and the environment.

Although PFAS lawsuits are prominent in the United States, resulting in more than $18 billion in settlements primarily related to environmental contamination of drinking water and soil, this issue is also gaining attention in Europe.

Verisk estimates that U.S. PFAS-related settlements could potentially reach between $120 billion and $165 billion as the extent of contamination in drinking water systems continues to be revealed, leading to more lawsuits over remediation costs. This highlights the extent of the financial risks that insurers could face if similar legal actions occur globally.

PFAS contamination in water and soil has also been detected in Europe, as shown by data from the Forever Pollution Project by Le Monde and its partners. Several European governments and residents have filed lawsuits against PFAS manufacturers, demanding compensation for environmental damage and health risks.

The report notes that new regulations, such as the updated EU Drinking Water Directive, will mandate further testing for PFAS, which could lead to more lawsuits.

Recent regulatory developments, including the new Product Liability Directive and the EU Representative Actions Directive, may also trigger further legal action. As more sites contaminated with PFAS are identified, the legal and regulatory environment could lead to a significant liability event in several European countries.

While studies have provided insight into the extent of PFAS contamination in Europe, efforts to quantify potential liability losses have been limited. The new model that Verisk has developed, in collaboration with Guy Carpenter, aims to close this gap by providing a clearer picture of potential risks in Germany, France and Belgium.

Modeling PFAS scenarios in these countries aims to help (re)insurers better identify and manage their risk exposure.

According to the report, a significant PFAS-related liability event in these European countries could range between €10 billion and €24 billion in potentially insurable liability losses at the ground level.

The analysis shows that dozens of industries could be affected, excluding manufacturers of PFAS products. This model represents a step toward understanding how PFAS risks can impact the earnings, capital and risk management strategies of reinsurers operating in Europe.

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