In the latest in a series from the Lloyd’s Market Association (LMA) Chris Mather – senior executive, technical underwriting and Alex Koukoudis – senior executive, finance and risk at the LMA examine the rising risks around the use of PFAS.

There is a growing wave of litigation related to plastics, particularly single-use, with significant implications for insurers. This evolving threat landscape also reinforces the growing convergence between environmental sustainability and risk governance, demanding a more integrated approach from insurers’ risk management, underwriting and sustainability functions.

While much public and legal attention has focused on PFAS (per- and polyfluoroalkyl substances), we have seen a quiet rise in the amount of litigation stemming from other plastics-related issues including contamination by microplastics and greenwashing. For insurers, the waterfront of liability is widening to encompass a range of insurance lines including D&O, E&O and product, commercial and environmental liabilities.

Global plastic production has increased nearly 200-fold since the 1950s, now producing an estimated 380 million tonnes per year. This has been accompanied by a surge in plastic waste, a large proportion of which is single use. These disposable plastics pose a potentially systemic liability challenge, not just an environmental one. For insurers, this demands a shift from reactive claims handling to proactive risk management — improving environmental awareness across underwriting, modelling, and client engagement.

A whole host of hazards

Plastics have been found everywhere from the deepest trench in the oceans to the bloodstream of polar bears. The full health effects of this are only beginning to be understood, but the harmful chemicals these plastics release can disrupt the human endocrine system and cause cancer.

Before they break down and begin to impact the human body on a molecular level, they also place substantial financial burdens on local authorities. Statista estimated in March this year that households in the UK throw away 1.7 billion pieces of plastic packaging every week – with overall plastic packaging waste generated in the UK reaching more than two million metric tons annually.

Even if the consumer sets out to recycle their plastic, this is not always possible. Many types of plastic are unrecyclable, with the only ways to dispose of them incineration or landfill – which create either toxic gases or microplastics.

And a litigation threat to boot

Not only are there extensive environmental and health concerns associated with higher levels of plastic pollution, but there is also a risk of litigation. The omnipresence of plastic means that plastic risks will touch companies in a range of sectors.

A report issued by Swiss Re earlier this year suggests scientific advances around proving causation and source attribution of plastic waste could “spark a rapid increase in environmental and product liability claims against plastic producers, users and waste managers”.  Similarly, Bird & Bird last year point to increased consumer awareness of environmental issues as a potential driver of greenwashing claims, as consumers are more able to see through ‘green claims’ that do not stand up to scrutiny.

For directors and officers the risk of greenwashing and the associated reputational risks are an area to watch. With the increasing marketability and desirability of ‘green’ products and environmentalism, the line between material action towards improving sustainability and advertising or marketing that misleadingly oversells those actions is a fine one.

Collaborative action required

It is hard to overstate the extent of the risk that these hazards pose to both the insurance market and to human and animal health more broadly. Because of the scale of the problem, as well as the potential of these cases to be a target for litigation funding, this risk could be systemic. Insurance is not the only answer, however, as public policy, directives, regulation and human behaviour will all play a part in reducing plastic waste.

To ensure that the insurance industry supports the broader ecosystem in its transition to greater sustainability, insurers need to collaborate across functions. The market can continue to deliver value in these cases by bringing the customer into the conversation earlier, proactively getting to understand and investigate exposures and mitigate them before they materialise as a claim or lawsuit.

Risk management is an integral part of the world’s transition to a sustainable future. The rise in plastics litigation underscores the need to embed environmental considerations into insurers’ risk frameworks. Sustainability strategies should account for pollution exposures in capital planning and disclosures, while risk teams must work closely with underwriters and legal teams to monitor wordings and anticipate regulatory shifts.

These evolutions are constant, and insurers should consider future regulatory developments carefully. New legislation may introduce liabilities for historic plastic pollution, and climate-related financial disclosures and reporting requirements are also likely to expand, with the IFRS Foundation’s 2024 Report revealing that full compliance with all 11 climate-related disclosure recommendations “remained limited to 2-3% of companies”.

As plastics litigation grows in complexity, scope and financial exposure, insurers could face claims greater than those related to PFAS or even asbestos. Proactive risk identification, policy wording reviews, detailed coverage analysis and active engagement with clients are essential. But so too is the opportunity to align underwriting strategies with environmental sustainability goals and contribute to a broader industry dialogue on how insurers can support their insureds in the green transition. These measures will help insurers navigate the anticipated transformation in environmental liability law.