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Biodiversity Net Gain

By Vista Insurance Brokers in Industry News

Vista Insurance Brokers Construction Team explain this important change to the planning application process.

Biodiversity Net Gain (BNG) is an approach to development and land management that aims to leave the natural environment in a measurably better state than it was before. It is an increasingly important requirement in planning applications under UK legislation and policies.

Key Principles of Biodiversity Net Gain:

  1. Enhancing biodiversity as a core outcome.
  2. Measurable gains, calculated using the Biodiversity Metric.
  3. The mitigation hierarchy: Avoid > Minimise > Restore > Offset.
  4. Prioritizing on-site biodiversity improvements first before off-site compensation.

BNG in the Planning Process

  1. Legislation: Biodiversity Net Gain is mandated by the Environment Act 2021 in England. As of November 2023, BNG has become a mandatory requirement for new developments (with certain exceptions).
  2. Requirements: Developers must achieve at least 10% biodiversity net gain compared to the pre-development baseline. A Biodiversity Gain Plan must be submitted as part of the planning application.
  3. The Biodiversity Metric: The metric assesses habitats, their condition, distinctiveness, and ecological importance. It helps determine the biodiversity "units" lost and gained from a development.
  4. BNG Options: On-site: Enhancing habitats within the development boundary. Off-site: Offsetting by improving biodiversity on land outside the site. Biodiversity credits: Purchasing credits from government schemes (as a last resort).

Steps to Achieve BNG in Planning

  1. Baseline Assessment: Conduct an ecological survey to map existing habitats using the DEFRA Biodiversity Metric.
  2. Design Phase: Integrate biodiversity measures into site design (green infrastructure, habitat creation, etc.).
  3. Mitigation Hierarchy: Avoid or reduce impacts first, then compensate where needed.
  4. Gain Plan Submission: Submit a Biodiversity Gain Plan with the planning application.
  5. Monitoring & Maintenance: BNG is monitored for at least 30 years to ensure gains are sustained.

Examples of BNG Measures:

  • Creating wildlife-friendly green spaces.
  • Planting native species and trees.
  • Establishing ponds, hedgerows, and wildflower meadows.
  • Enhancing urban biodiversity through green roofs and walls.
  • Supporting pollinators through species-specific planting.

Challenges in Achieving BNG:

  • Land availability for habitat creation.
  • Accurate baseline assessments.
  • Long-term management and monitoring.

Biodiversity Net Gain (BNG) has several implications for construction insurance, particularly in managing risks, liabilities, and regulatory compliance during construction projects. Here's how they relate:

1. Regulatory Compliance Risk

  • With BNG becoming mandatory under the Environment Act 2021, developers and contractors must comply with biodiversity requirements to secure planning permissions.
  • Construction insurance providers may assess the risks of non-compliance when underwriting policies. Non-compliance penalties or project delays due to failure to achieve BNG targets could trigger financial losses.

Impact on Insurance:

  • Insurers may request evidence that the developer has a clear Biodiversity Gain Plan in place.
  • Projects with incomplete biodiversity strategies may face higher premiums or exclusions.

2. Environmental Liability Insurance (ELI)

  • Environmental Liability Insurance protects against damages caused to the natural environment during construction activities.
  • If construction activities damage habitats or fail to meet BNG targets, there could be claims or penalties under environmental laws.

Key Considerations:

  • Habitat destruction during construction could require costly offsetting or restoration.
  • Insurers may require developers to demonstrate robust BNG measures to mitigate risks.

3. Delays in Projects (Contractor’s All Risks)

  • Failure to meet BNG commitments during construction may delay the approval process or handover of projects.
  • Contractor’s All Risks (CAR) policies may come into play when delays impact construction schedules.

Example:

  • A delay caused by the failure to implement on-site BNG measures (e.g., failing to install habitat features) could increase project costs. Insurers may cover such delays depending on policy terms.

4. Performance Bonds & Financial Guarantees

  • Many local authorities now require financial guarantees or bonds to ensure long-term delivery of biodiversity measures (minimum 30 years).
  • Developers might use insurance products or bonds to satisfy these financial commitments.

Impact:

  • Insurers could provide performance bonds to ensure BNG obligations are fulfilled over the long term.

5. Reputational Risk and Corporate Responsibility

  • Failure to meet biodiversity requirements can damage a developer's or contractor’s reputation.
  • Environmental claims from third parties, such as environmental groups or regulators, could be costly.

Related Insurance:

  • Professional Indemnity (PI) insurance may protect consultants (e.g., ecologists) if a Biodiversity Gain Plan is later challenged or found inadequate.

6. Natural Catastrophe and Habitat Risk

  • BNG often involves creating or restoring habitats (e.g., wetlands, woodlands).
  • These natural features may be vulnerable to floods, storms, or other natural catastrophes, impacting their condition and the ability to achieve biodiversity targets.

Insurance Considerations:

  • Insurers may include these risks in property insurance or environmental policies.
  • Developers might need additional coverage to protect habitats created as part of BNG.

Practical Example

A construction company develops a residential estate and is required to achieve 10% BNG by creating woodland and wildflower meadows.

  • During construction, damage occurs to the designated habitat area.
  • Environmental Liability Insurance may cover the cost of restoring the habitat.
  • Any delays to the project timeline may trigger claims under Contractor’s All Risks insurance.

Key Takeaways for Construction Insurance

  1. BNG compliance introduces a new environmental risk for construction projects.
  2. Environmental Liability and Contractor’s All Risks policies may need to be tailored to include BNG-related risks.
  3. Insurers may request evidence of robust BNG plans and risk mitigation measures.
  4. Long-term obligations (30-year maintenance) may require performance bonds or financial guarantees.

Please contact the Construction team at Vista Insurance Brokers to discuss how we can assist with your project or carry out a non-obligation due diligence report.