The mood is not good between German industry and its insurers. Sure, you eat and drink together at the annual conference in Unterschleißheim near Munich, which is organized by the General Association of Insurance Taking Businesses (GVNW), an industry trade association. But beneath the surface, things are bubbling violently. The current controversial topic: Insurers are increasingly excluding risks associated with PFAS substances. The abbreviation stands for per- and polyfluorinated alkyl substances. They are processed in cosmetics, cookware, paper coatings and textiles and used for the surface treatment of metals and plastics, in pesticides or firefighting foam.
According to various studies, at least some of these approximately 10,000 PFAS substances can be harmful to health and, among other things, be responsible for cancer, diabetes and infertility. Because they do not break down in nature, they are also called eternal chemicals.
PFAS is not the only point of contention. Insurers have raised prices massively over the past three years – not good for the industry, after all it has to fight anyway given the weak economic development. But most insurance buyers and industry finance heads still understand the higher prices; after all, it was very, very cheap in previous years. The current discontent is fueled by two sources: Insurers have drastically reduced their offerings for many risks. This is causing unrest in the industry. If a group needs coverage for more than 100 million euros, it often has to take out ten or 15 partial coverages with different providers.
The second problem is the exclusions. Since the start of the Ukraine war, insurers have excluded the entire region. If German companies suffer damage there, they are not insured. The ban also includes Ukraine. “With a view to the troubled Ukraine, this seems unfair,” said Patrick Fiedler, chairman of the GVNW and a full-time risk manager at BASF.
And now PFAS. “Liability claims due to damage caused by per- and polyfluorinated alkyl substances (PFAS) are excluded from the insurance,” says one insurer’s current terms and conditions. If a manufacturer had to pay compensation because of PFAS products, it would have no insurance.
The materials are also needed for heat pumps
Insurers and reinsurers fear that large losses will occur to many customers at the same time, a so-called accumulation. That could affect their substance. They point to a current case in the USA: The technology group 3M, known here for Scotch and Post-it, recently paid 10.3 billion dollars (9.6 billion euros) in damages to water suppliers to settle a legal dispute over PFAS.
Jean-Jacques Henchoz, CEO of Hannover Re, defended the exclusions at the meeting. “There are between 8,000 and 10,000 different PFAS substances and studies on what health consequences they have,” he said. “We have to exclude some of the risks first, precisely because of the immense accumulation risks.” You need more insight and experience as to exactly where the risks lie. “Then we can differentiate.”
The industry criticizes the fact that insurers are making legally permitted production processes more difficult by withdrawing insurance coverage. Fiedler urged insurers to take a differentiated approach. “There are 10,000 different substances in this category, some are dangerous, some are not.” A possible ban on certain substances is planned at EU level; the PFAS substance Teflon has been banned for years. Fiedler: “Especially in the phase of uncertainty – what is really forbidden, what is really dangerous – such a far-reaching exclusion of coverage cannot be the right answer.”
In addition, the materials in heat pumps, wind turbines and the production of solar cells are almost impossible to replace. “If we now completely exclude PFAS, we will not be able to achieve the energy transition,” said Christian Böhm from the Freudenberg technology group. “As an insurer, are you aware of these dimensions?”
According to Jürgen Seiring from the mechanical engineering association VDMA, a large proportion of PFAS substances are not dangerous. He offered the insurers a close discussion about this so that blanket exclusions are not necessary. Insurer Henchoz wants to talk. It says a lot about the mood between industry and insurers that this dialogue has not yet taken place.