Emission allowances and business interruption insurance in the EU
The Emissions Trading Directive passed by the European Union has triggered new challenges for providers of business interruption (BI) insurance. Swiss Re believes that the current BI insurance systems are flexible and robust enough to successfully address the implications of the new directive.
In 2003, the European Parliament and Council issued a directive, based on the Kyoto Protocol, establishing a scheme for the trading of greenhouse gas emission allowances. The second commitment period started on 1 January 2008 and will end in 2012. The trading system follows the scheme already introduced with the first period in 2005.
Opinions among brokers and insurers vary widely in terms of how to handle emission allowances in business interruption insurance and there are no globally recognised accounting standards in place. Swiss Re, however, is confident that underwriting practices and recommendations, as outlined in the Focus report, can produce results that will satisfy both insured and insurers. At present, business interruption insurance for emitters obliged to purchase allowances in the EU will only be marginally affected by the implementation of the directive.
