PFAS chemicals have been found in a vast array of products, from non-stick cookware and stain-resistant textiles to firefighting foams. With over 10,000 compounds classified under PFAS and more than 1,200 registered for industrial and consumer use in the United States alone, the scale of potential exposure is immense.
AmericanAg recognises that PFAS are environmentally persistent, bioaccumulative, and toxic even at low levels. Traces of these chemicals have been found in the blood of people across the globe, and contamination has been linked to industrial activities, agricultural practices involving biosolids, and the widespread use of PFAS-based firefighting foams.
Health and environmental concerns
Although definitive scientific conclusions linking PFAS to specific illnesses remain elusive, the chemicals have been associated with numerous health risks, including cancers, liver and kidney damage, thyroid disease, reproductive harm, and developmental issues. A significant challenge in the insurance sector lies in establishing causation, especially when PFAS exposure is so widespread and cumulative.
Unlike asbestos, which had a clear link to mesothelioma, PFAS lacks a “signature disease”, making liability attribution and claims modelling more complex. Nonetheless, litigation and regulatory action are increasing, with jurisdictions around the world beginning to impose restrictions and demand remediation.
Regulatory developments
In the United States, the Environmental Protection Agency (EPA) has mandated that all public water systems be tested for PFAS within a three-year timeframe, beginning in 2024. Levels above four parts per trillion (for some PFAS types) will be classified as contamination, triggering a five-year remediation deadline. Technologies such as carbon filtration and reverse osmosis are available but costly, raising significant financial concerns for both public systems and private actors.
Meanwhile, the European Union is considering a near-total ban on non-essential PFAS usage, with specific exceptions for medical and other critical applications. National efforts, such as bans on PFAS in food packaging in Denmark and textiles in France, complement EU-wide initiatives like the Drinking Water Directive.
Implications for reinsurance
AmericanAg has identified PFAS as a long-tail risk that could result in claims emerging decades after policies have expired. Scenarios involving bodily injury, property damage, and environmental clean-up costs are plausible, particularly in cases where past reinsurance treaties offered coverage for such risks.
Complications arise around issues such as:
- Treaty language (e.g. vague pollution exclusions).
- Whether PFAS are defined as pollutants.
- Allocation of defence costs.
- Claims control provisions.
Many treaties written before the introduction of absolute pollution exclusions in 1986 used less precise language, often relying on “sudden and accidental” pollution clauses—wording ill-suited to gradual PFAS contamination.
AmericanAg is urging insurers and reinsurers to conduct audits of legacy portfolios, tighten treaty language around pollution and PFAS exclusions, and explore alternative risk transfer mechanisms such as adverse development covers and loss portfolio transfers. While modern treaties increasingly contain PFAS exclusions, the risk from older exposures remains an area of active concern.
Looking ahead, AmericanAg anticipates continued litigation, regulatory expansion, and increasing pressure on capital adequacy due to unexpected PFAS claims. The insurer advises clients to engage legal counsel to interpret ambiguous treaty language and assess potential liabilities. Additionally, it stresses the importance of modelling incurred but not reported (IBNR) liabilities as more data on contamination and litigation becomes available.
Causation will remain a central challenge. Without a clear medical or legal link between PFAS and specific health outcomes, quantifying potential losses is difficult. Yet the financial precedents set by recent settlements, such as the $11 billion payout by 3M in the United States, indicate that liability for PFAS contamination is no longer theoretical.
