PFAS, per- and polyfluoroalkyl substances, is an umbrella term for a family of thousands of man-made chemicals that are widely used in a wide range of everyday products such as clothing, paints, cleaning products, food packaging, and firefighting foams, as well as medical supplies like surgical gowns, drapes and implantable devices. The rapid economic growth and urbanisation in Asia have resulted in the burgeoning commercial applications of PFAS due to their persistent nature. However, this same nature also makes it difficult for them to break down in the environment, with some substances taking over 1,000 years to degrade. Hence, PFAS is commonly referred to as ‘Forever Chemicals.’
*Industries can vary by underwriters.
PFAS regulations are accelerating
The rising concerns of health and environmental impacts have led to a wide range of regulatory activities globally, for example:
- US Environmental Protection Agency (EPA) is setting new PFAS standards that determine the maximum contamination levels for PFAS in drinking water.i
- European Commission in the European Union (EU) has planned to phase out all PFAS unless the substances are proven irreplaceable and essential to society, and has proposed EU-wide ban on the sale, use and formulation of all firefighting foams.ii
Countries in Asia have also started to tighten PFAS regulations:
- China added two subgroups of PFAS to a regulated list to manage and restrict the production, use and trading of these substances in 2023.iii
- Japan and South Korea enacted new export requirements for PFOA in 2021.iii
- South Korea proposed the ban of eight PFAS in the cosmetic industry in 2022.iv
- Singapore will phase out firefighting foams containing PFAS with effect from 2026.v
The impact of PFAS liability to insurance coverage
Companies that manufacture, use or distribute PFAS are now increasingly open to PFAS liability. In 2024 alone, there have been two high-profile settlements in the US related to water system contaminations, resulting in compensation ranging from more than US $3 millionvi to over US $10 billionvii. Additionally, organisations are also facing growing concerns raised by governments and advocacy groups about the cleanup costs associated with the current or historical use of PFAS.viii,ix While there has not been a major settlement in Asia, the regulatory environment in the region is moving quickly.
Against this backdrop, insurers have been mindful of their exposure to liabilities arising from PFAS use. They are concerned that PFAS could lead to the same kind of expensive, unforeseen claims that caused the asbestos crisis. Some insurers have started applying exclusions for high-risk industries or companies with known PFAS exposures or seek to limit their potential exposure to PFAS claims.
Take 3 actions to stay ahead of the impact
Considering the breadth of industries using PFAS in Asia, the impact on the available risk transfer options could be far-reaching. Businesses with PFAS exposures may wish to consider the following to get ahead of the insurance impact:
- Businesses should understand their PFAS exposure and its potential impact across their operations, supply chain and value chain.
- Be prepared for additional underwriting questions at renewal, including the need to complete PFAS questionnaires.
- Explore insurance options, such as commercial general liability, product liability insurance, pollution legal liability, contractors pollution liability; and develop risk mitigation strategies early.
It is important that businesses work with a trusted risk advisor to help identify risk exposures and optimise insurance programs to obtain the broadest coverage available and more favourable terms despite potential PFAS exclusions, including risk advisory services such as risk engineering and claims support.
Reach out to your Marsh Asia contact to help you identify and evaluate your PFAS risk exposure and for a discussion of insurance programs and risk transfer strategies.
i United States Environmental Protection Agency. https://www.epa.gov/pfas/key-epa-actions-address-pfas
ii Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions Chemicals Strategy for Sustainability Towards a Toxic-Free Environment. https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=COM:2020:667:FIN
iii Global Regulations Around PFAS: The Past, the Present and the Future. https://icrl.lexxion.eu/article/icrl/2023/1/4/display/html
iv New Regulations Targeting Forever Chemicals, https://www.idtechex.com/en/research-article/new-regulations-targeting-forever-chemicals/30920#:~:text=For%20example%2C%20South%20Korea%20proposed,the%20cosmetics%20industry%20in%202022.&text=The%20introduction%20of%20the%20universal,regulating%20PFAS%20to%20be%20considered.
v National Environment Agency. https://www.nea.gov.sg/docs/default-source/default-document-library/phase-out-of-fire-fighting-foams-containing-pfas-chemicals-listed-under-the-stockholm-convention_15mar24.pdf
vi https://www.basf.com/us/en/media/news-releases/2024/05/basf-corporation-enters-class-settlement-with-u-s--public-water-
vii 3M Settlement with Public Water Suppliers to Address PFAS in Drinking Water Receives Final Court Approval. https://investors.3m.com/news-events/press-releases/detail/1836/3m-settlement-with-public-water-suppliers-to-address-pfas#
viii Dutch government to hold 3M liable for 'forever chemicals' damage. https://www.reuters.com/business/environment/dutch-government-hold-3m-liable-forever-chemicals-damage-2023-05-23/
ix Eight arrested as climate activists break into chemicals plant in France. https://www.reuters.com/world/europe/eight-arrested-climate-activists-break-into-chemicals-plant-france-2024-03-02/#:~:text=Several%20hundred%20protesters%20briefly%20broke%20into