Swiss Re promotes risk analysis in light of EU “polluter-pays” legislation

New, polluter-pay environmental legislation in the European Union is based on a new liability regime under public law and will create unprecedented loss complexes for which claims experience is not yet available, according to a recent report by Swiss Re.
It is important for the insurance industry to assess the exposure inherent in these new scenarios.
The 42-page Swiss Re report, Insuring environmental damage in the European Union, looks at some of the implications of implementing the new Environmental Liability Directive, which some EU member states have transposed into their individual national legislation to meet an Apr. 30, 2007 target date.
The report notes the new EU regulations are designed to make polluters pay for remediation costs resulting from damage to the environment. It follows on similar legislation passed in the United States, the report notes, including the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA), a federal law, as well as the Oil Pollution Act and the Clean Water Act.
Swiss Re notes reliable estimates [of liability exposure based on the new legislation] are particularly important when it comes to assessing hazardous and potentially hazardous activities and operating facilities.
Swiss Re further observes different approaches can be adopted when designing new insurance products. However, it makes sense to look at existing, traditional solutions as a starting point, and use them to develop new forms of coverage.
The report notes insurance cover is generally restricted to sudden and accidental damage, since such events can be traced back to a fixed point in time. It suggests insurers can help determine their new exposures based on their assessment of these fixed-point loss experiences for conventional bodily injury and property damage claims.