FERMA plans research on investments in environmental protection

FERMA plans research on investments in environmental protection | Insurance Business

FERMA plans research on investments in environmental protection
The Federation of European Risk Management Associations (FERMA) plans to publish a report in 2018 on investment decisions in environmental protection as part of our contribution to the discussion about the future implementation of the Environmental Liability Directive (ELD). We will decide the scope of the project early in the new year.

We welcome the decision of the European Commission not to revise the ELD, but remain concerned about the latest recommendations on the implementation of the Directive adopted in a European Parliament report on 26 October 2017. The most significant issues are possible mandatory financial security and potential extensions of exposure.

Our argument remains that these measures could prove counterproductive in terms of reducing the risks to the environment, because they would affect the resources that companies have for environmental protection measures. Instead, we believe that the healthy and growing market for environmental impairment liability (EIL) insurance provides incentives for operators to mitigate the risks of pollution while preserving their ability to make the investments necessary to do so.

A three-year work programme for the Commission is underway to improve implementation of the Directive. This Multi-Annual Work Programme for 2017 – 2020 follows a comprehensive review of the ELD by the Commission, which formed the basis of the report now adopted by the Parliament.

Mandatory financial security, through bonds, letters of credit, financial provisions or most likely insurance schemes, continues to have its supporters in the European Parliament, so it will be considered. Their view is that every business in the EU must be able to demonstrate its capacity to respond to an environmental incident, even in case of insolvency.

A second area of concern for us in the review of the ELD relates to the possible extension of the strict liability regime for all operators. When applied, an organisation would be deemed liable for the activity at the source of the damage, whether a fault or negligence was established or not. Under the current provisions of the ELD, strict liability only applies to a restricted list of dangerous activities. Extending strict liability to all operators would represent a significant additional cost for EU businesses, particularly for environmental insurance.

FERMA’s final concern regarding future ELD development relates to the potential extension of the scope of environmental damages falling under the ELD regime. New categories like damage to air or the accidental release of alien invasive species (i.e. foreign plants or animals causing losses to the local biodiversity) could be considered.

In both cases, FERMA believes that encouraging operators to invest in risk mitigation is much more likely to be cost-effective in protecting the environment than a potentially expensive extension of liability whose value is not proven.

FERMA is now focusing on demonstrating the value of environmental investment in prevention and protection. Risk managers already know that pollution incidents mean business interruption, damage to reputation and loss of competitiveness.

Preventing environmental damage is for the mutual benefit of everyone, companies and society altogether.

Jo Willaert is President of FERMA. www.ferma.eu