Terrafirma Risk Retention Group was recently formed in Vermont to offer coverage to land trusts against the cost of defending conservation easements and conserved lands. Although not specialty insurance in the usual sense of the term, we think its story is an interesting one and a useful illustration of the potential for a group to form its own insurance answer when the traditional insurance market won’t.
And, we are so proud to see them get their start, having assisted in the feasibility study that led to Terrafirma’s creation.
We interviewed Leslie Ratley-Beach, Conservation Defense Director for Land Trust Alliance about her experiences in forming this new program.
Leslie, please tell us the inspiration behind the creation of Terrafirma
Land trust leaders discussed the idea behind Terrafirma for over twenty years. We knew we are stronger together but the impetus that propelled land trusts to start Terrafirma originated with a question raised in the late 1990s by Colorado Open Lands (an accredited land trust): “It wasn’t any particular problem we ran into,” recalls Dan Pike, with Colorado Open Lands. “We just started asking what we would do if we ever had to go to court on our easements. And honestly, we didn’t have a good answer.”
“We realized that if land trusts approached the issue as a community, we’d have a critical mass to create our own insurance — something that worked for land trusts and their unique needs.” But, the effort required a much larger scale – and that’s when the Land Trust Alliance offered to help. From there, the Alliance led the national effort that resulted in Terrafirma being formed by The Land Trust Alliance in 2011 to help land trusts defend their conserved lands from legal challenge.”
What coverage does Terrafirma offer?
Terrafirma is a Risk Retention Group domiciled in Vermont that offers coverage for costs of defending conservation easements and conserved lands. It is designed to help cover legal and technical expenses incurred by the participating land trust insureds while protecting easements and conserved properties from legal challenges. Annual aggregate limits of up to $500,000 are available ($750,000 for larger land trusts) and a per claim deductible of $5,000 applies.
What is a Land Trust?
A land trust is a nonprofit organization that actively works to conserve land by undertaking or assisting in land or conservation easement acquisition, or by its stewardship of such land or easements.
Land trusts work with landowners and the community to conserve land by accepting donations of land, purchasing land, negotiating private, voluntary conservation agreements on land, and stewarding conserved land through the generations to come.
Today, there are 1,700 land trusts that have more than 100,000 volunteers and 5 million members. So far, land trusts have conserved 37 million acres of land in America – an area roughly the size of all the New England states combined. See www.landtrustalliance.org/ for more.
Can you tell us about the role of the Land Trust Alliance in the formation of Terrafirma?
Conservation leaders around the country told the Land Trust Alliance that land trusts needed a national coordinated conservation defense service and so the Alliance stepped in to coordinate the effort. The Alliance retained an independent consulting firm (Betterley Risk Consultants), to conduct a feasibility study, research alternative mechanisms, and help design the structure and coverage of the program.
The Alliance assigned staff and engaged volunteers to work with the consultant. Having significant staff and volunteer involvement was critical in many ways, not only to help build support and credibility for the program, but also to help ensure that Betterley’s technical knowledge was transferred to the Alliance.
You had a lot of volunteer support; how was that helpful?
Yes – incredibly so. The list of critical volunteers is lengthy, and includes business and insurance leaders, attorneys and land trust practitioners. I am so grateful for their expertise and generous assistance. We were able to draw on attorneys from major law firms, insurance professionals, and members of the land trusts themselves to help us build this important resource. The law firm of Sullivan & Cromwell in particular was instrumental in organizing Terrafirma donating over $800,000 hours of legal time to the effort.
You worked on this project from the beginning in 2007. Looking back, what might you have done differently?
It was a lot of work, but worth it. Surprisingly the 2008 Recession that hit in the middle of this project did not slow us down mostly because the time was so right for this product and we had a long lead time on development starting in late 2007 and resulting in the Terrafirma insurance license in July 2012. Our contributors saw the benefit of a well-capitalized and long-term solution and came through for us.
We also found that the benefit of a professional web site to communicate with our membership was three times the expense that we expected, as was the cost of filing and regulatory approval. But – it was worth it. I would also allocate 18 months lead time on a start up website instead of a year as we did. It is a monumental effort. And I might add – don’t worry! Learn from your excellent consultant and be confident that you will learn all you need to be ready at each stage of the process.
What do you think will be the most important success drivers for the program?
Of course, the ability of the leadership in bringing effective risk management tools to the members will be key – Terrafirma provides access for its members to:
- The Conservation Defense Clearinghouse online resource
- An Attorney Locator listing experienced conservation attorneys
- Conservation Defense Practical Pointers
- Online Course
- Forums to support networking with colleagues and conservation experts
So will our Claims Committee, which is comprised of outside experts and land trust representatives to oversee claims management working with the insured land trusts, which means that the land trust with the claim helps determine how to manage the case. This will help guide our member insureds in effective defense strategies.
How can our readers learn more about Terrafirma?
Thank you, Leslie. We are immensely proud of the work that you, the Alliance, and the many volunteers have done to help ensure conservation permanence. It was a challenge we are so glad we could be a part of.