Lockton | Market Update - Environmental

Environmental

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The European Liability Directive

On April 21, 2004, the European Union (E.U.) implemented the E.U. Environmental Liability Directive 2004/35/CE (ELD). The ELD’s primary objective is to hold companies financially responsible for preventing and remedying environmental damage caused by their businesses. This was landmark legislation with regards to environmental liability in the E.U. member states.

The ELD is based on two fundamental components:

The precautionary principle, which requires companies to take preventative measures when their activities pose an "imminent threat of environmental damage" and
The concept of "polluter pays," which makes businesses legally and financially accountable for environmental damage they cause to water, air, land, and protected animal species. (Similar to natural resource damages in the United States, the ELD labeled the potential to significantly adversely affect protected species and natural habitats as "damage to biodiversity.")

E.U. member states were given until April 2007 to transpose this directive into law in their countries. All member states have now transposed the Directive though the April 2007 deadline was not tightly adhered to. Most countries transposed the Directive exactly as it was presented. Other countries added to the Directive, imposing more stringent requirements on local operators. Member states that have fully transposed the ELD are:

• Austria	• Finland	• Latvia	• Romania
• Belgium	• France	• Lithuania	• Slovakia
• Bulgaria	• Germany	• Luxembourg	• Slovenia
• Cyprus	• Greece	• Malta	• Spain
• Czech Republic	• Hungary	• Netherlands	• Sweden
• Denmark	• Ireland	• Poland	• U.K.
• Estonia	• Italy	• Portugal

Mandatory financial security responsibilities will be put in place by a large number of the member states beginning in 2010. Properly negotiated insurance policies are an option to meet compulsory financial security requirements.

Several member states have implemented or set compliance dates for the compulsory financial security component of the directive. They are:

Portugal (January 1, 2010)
Spain (after April 30, 2010)
Hungary (2010)
Romania (2010)
Greece (2011)
Bulgaria (2011)
Slovakia (2012)
Czech Republic (2013)

We are working with the global carriers to provide insurance solutions rather than only posting Letters of Credit to satisfy the emerging financial responsibility requirements. Carriers are using their underwriting models developed within the last 20 years, but in several countries this is new and an unproven line of coverage.

The E.U. Commission for the ELD is required to present a report on or before April 30, 2010. Included in that report will be:

The effectiveness of the ELD to date.
The availability of insurance and other types of financial security.

The Commission is required to submit another report to the European Parliament and the Council in April 2014 regarding the progress of financial transfer products and any amendments necessary.

As the report is being prepared, Lockton is working with our carrier partners to develop products and solutions to demonstrate compliance with the ELD. We anticipate a blend of locally admitted underlying policies with global master policies being put in place for companies with operations in several members states.

With our global network of offices and environmental expertise, Lockton can assist you in understanding and mitigating emerging environmental liabilities facing your global operations.

Please contact your Lockton Representative for further information regarding any information contained in this market update.

	Matt Pateidl Vice President Environmental Risk Kansas City, MO Tel: 816.960.9465 E-mail: mpateidl@lockton.com
	Lisa Humphrey Environmental Risk International Chicago, IL Tel: 312.669.6785 E-mail: lhumphrey@lockton.com
	Maggie Moore Account Manager International Kansas City, MO Tel: 816.960.9922 E-mail: mmoore@lockton.com