Armed with the go-ahead from two rating agencies, Donaldson, Lufkin & Jenrette this month is preparing to launch the first-ever small loan conduit CMBS program wrapped entirely by an environmental insurance policy, a deal that would help solidify this type of insurance as a valuable option for both issuers and investors.

After months of negotiations with insurer American International Group (AIG), both Moody's Investors Service and Fitch IBCA recently issued reports giving a thumbs-up to the use of environmental insurance in lieu of, or in addition to, standard environmental due diligence assessments for commercial mortgage securitizations. According to market players, the reports may foreshadow an upcoming trend toward environmental insurance and away from due diligence for upcoming CMBS deals.

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