EC Environmental Liability Directive: A model for hazard analysis
The EC Directive on Environmental Liability with regard to the Prevention and Remedying of Environmental Damage came into force in April 2004, and the member states have the mandate to integrate it into their national legislation within a three-year period ending in April 2007. The Directive comprehensively regulates liability in cases of environmental damage and introduces new categories of damage. For the insurance industry, this poses new challenges in terms of capturing and evaluating environmental risks.
Current risk assessment methods are based on experience from past losses and potential insured loss scenarios. Since, in general, the new categories of damage listed in this Directive were not insured in the past, the insurance industry lacks the experience-based values required to assess the corresponding risks. This applies to damage affecting water and land, and to protected species and natural habitats in particular.
This focus report provides an overview of the consequences of the new environmental liability regulations in Europe and the relevant factors for site-related assessments of environmental damage. It describes a possible approach for assessing environmental loss exposures with the assistance of geographic information systems.
