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

Samantha Ferneley – Head of Specialist Risks – 07944 843896

Terry Edwards – Construction and Real Estate – Business Development South – 07950 919511