Understanding PFAS Risks and Insurance — Are Businesses Prepared?
Published On : 31 Jan 2025
Understanding PFAS Risks and Insurance — Are Businesses Prepared?
The industrial landscape is evolving rapidly, with businesses facing new challenges that demand careful attention and swift action. Few emerging issues have attracted more global scrutiny than regulatory compliance and liability risks. Concerns over environmental and product safety continue to impact industries worldwide.
The energy, manufacturing and chemicals sectors are constantly trying to stay ahead of challenges that could impact their operations and financial stability. One emerging concern that has gained global attention is the potential liabilities linked to per- and polyfluoroalkyl substances (PFAS).
Known for their resilience and versatility, PFAS (commonly known as ‘forever chemicals’) are used in countless products. However, their persistence in the environment and growing regulatory analysis have placed them under the spotlight. For businesses, understanding PFAS, the risks attached to them and the insurance implications is no longer optional but essential.
What are forever chemicals?
PFAS are a group of more than 12,000 man-made chemicals used in industry and consumer products worldwide due to their resistance to heat, water and oil. The chemicals were first broadly developed and manufactured in the 1940s by DuPont for their patented Teflon product used for non-stick cookware[1]. PFAS are called forever chemicals because they are nearly impossible to break down.
Key sources of PFAS contamination
PFAS are widely used across numerous sectors, and their applications range from adhesives and lubricants to firefighting foams and coatings. However, their persistence in the environment and accumulation in living organisms have led to mounting concerns about their impact on human health and ecosystems.
PFAS are used in consumer products and have various industrial applications. They can enter the environment through several pathways:
- Manufacturing and industrial discharge: Facilities that produce or use PFAS may release these chemicals into the air, water and soil.
- Consumer products: Everyday use and disposal of PFAS-containing products can lead to contamination. For example, washing PFAS-treated fabrics can release PFAS into wastewater.
- Firefighting foam: Using PFAS-containing firefighting foams, especially in training exercises and emergency responses, can lead to soil and water contamination.
- Landfills and waste disposal: Disposal of PFAS-containing products in landfills can result in leaching of these chemicals into groundwater.
- Atmospheric deposition: PFAS can be released into the air and deposited in soil and water through precipitation.
Insurance and PFAS risks: Will the UK follow the US trend?
Insurance is vital in managing business risks, but the evolving PFAS landscape presents significant challenges from a coverage and claims perspective. In the US, businesses using PFAS in their products are already facing lawsuits and claims for damages caused by these substances[2]. The financial repercussions of these lawsuits are significant, with some organisations facing multi-million-dollar settlements.
Fearing the spread of such 'nuclear verdicts', insurers in the US and other regions have started to exclude PFAS claims[3]. Historically, the UK’s claims landscape often follows that of the US, and it is anticipated that UK-based businesses may soon face similar claims as awareness and understanding of PFAS-related risks increase. The UK insurance market is already bracing for this possibility, with insurers beginning to exclude cover for PFAS claims. This shift could expose businesses, making it increasingly difficult, if not impossible, to secure coverage for PFAS-related liabilities. However, while exclusions are becoming more common, some companies may still have coverage for historical liabilities.
As regulatory scrutiny intensifies and the long-term health and environmental impacts of PFAS become clearer, products containing these chemicals could transform from essential components into significant financial liabilities. Anticipating potential claims, even from indirect exposure, many companies have already begun phasing out PFAS to mitigate financial and regulatory risks.
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PFAS Regulatory Framework in the UK
The UK authorities are considering expanded restrictions, particularly on PFAS in firefighting foams, textiles and cleaning products. The government has convened a PFAS Chemicals Stakeholders Forum to explore alternatives and policy options, while UK REACH may soon impose broader PFAS limits. Future enforcement measures, potential liability risks and insurance implications will make PFAS compliance a critical issue for businesses operating in the UK. |
What can businesses do?
Given the potential removal of insurance coverage for PFAS claims, businesses need to act now to mitigate their risks. This involves a thorough assessment of their operations and supply chains:
- Assess raw materials: Review all purchased materials to identify whether PFAS are present. Collaborate with suppliers to obtain detailed information about their composition.
- Evaluate production processes: Examine whether PFAS are used during production and explore alternatives to replace them.
- Eliminate PFAS: Consider the feasibility of removing PFAS from products. Understand the costs, timelines and potential challenges in transitioning to PFAS-free alternatives.
- Monitor regulatory changes: Stay informed about emerging regulations in the UK and globally to ensure compliance and reduce the risk of future claims.
Why it matters now?
The timeline for UK insurers to exclude PFAS claims is uncertain, but the trend is clear. Businesses that act proactively can reduce their exposure to financial and reputational risks. By eliminating or managing PFAS in their products, companies can position themselves ahead of regulatory and market changes, demonstrating a commitment to sustainability and responsibility.
Additionally, discussions about PFAS risks are gaining momentum across various sectors. This allows businesses to engage with their insurance brokers or OAMPS Hazardous Industries to better understand their risk profiles and available solutions.
The sole purpose of this article is to provide guidance on the issues covered. This article is not intended to give legal advice, and, accordingly, it should not be relied upon. It should not be regarded as a comprehensive statement of the law and/or market practice in this area. We make no claims as to the completeness or accuracy of the information contained herein or in the links which were live at the date of publication. You should not act upon (or should refrain from acting upon) information in this publication without first seeking specific legal and/or specialist advice. OAMPS Hazardous Industries accepts no liability for any inaccuracy, omission or mistake in this publication, nor will we be responsible for any loss which may be suffered as a result of any person relying on the information contained herein.
OAMPS Hazardous Industries is part of Pen Underwriting Limited which is authorised and regulated by the Financial Conduct Authority (FCA number 314493). Registered Office: The Walbrook Building, 25 Walbrook, London EC4N 8AW. Registered in England and Wales. Company Number: 5172311.
[1] Popkin, Gabriel. “Finding PFAS Wherever They’re Hiding,” NIST, 28 Mar 2024.
[2] King, Robert. “PFAS Class Action Lawsuit — January 2025 Update,” King Law, 05 Feb 2025.
[3] Santoro, Helen. “Insurers Are Backing Out of Covering Harm From PFAS Exposure,” Sierra Club, 27 Jul 2024.
[4] “PFAS Regulation in the UK,” Pinsent Masons, 01 Feb 2024.
