Insurers need to develop new cover in response to the European Environmental Liability Directive, which comes into force at the end of April.
The Federation of European Risk Management Associations (Ferma) has called on insurers to be less “risk averse” and develop products that will allow businesses to protect themselves against new exposures to liability for environmental impairment.
The European Commission has given the insurance industry until 2010 to develop financial mechanisms for responding to the liabilities.
Ferma indicated that insurers should make cover available at a reasonable price.
Ferma's Pierre Sonigo said that existing insurance wordings are limited and will exclude the new liabilities, but the insurance industry seems reluctant to offer new products until all uncertainties arising from the directive are clarified.
He commented: “At the moment, insurers are risk averse when it comes to environmental liability. They should be more proactive in providing products now that the directive is being transposed into national law. Our companies need to take risk to survive; insurers should do so, too.”
One of the principal issues is that the directive establishes the environment as a legal entity for the first time. National governments will have the responsibility to bring claims against polluters on behalf of the environment, and damages will not be in the form of financial payments, but as restitution of the environment to its state before the pollution occurred. Insurance policies as they are now would not respond to a claim of this type.
The association opposes any compulsory financial security schemes but instead wants to see a competitive insurance market for environmental risks within which pools could operate if they served a purpose.
