Liberty International Underwriters

Seguro de Responsabilidade Ambiental

Environmental Risk and the Environmental Liability Directive

Duncan Spencer

Vice President

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ContentsContents

• What is Environmental Risk?What is Environmental Risk?• The Environmental Liability DirectiveThe Environmental Liability Directive• Lessons From the Rest of EuropeLessons From the Rest of Europe• The Benefits of EIL InsuranceThe Benefits of EIL Insurance• Key IssuesKey Issues

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What is Environmental Risk?What is Environmental Risk?

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Risk AssessmentRisk Assessment

ReceptorReceptorReceptorReceptor

SourceSourceSourceSource

PathwayPathwayPathwayPathway

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Conceptual ModelConceptual Model

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Risk and TimeRisk and Time

TimeTime

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Poor Poor ManagementManagement

Leaking Leaking DrumsDrums

Change in Change in UseUse

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The Environmental Liability The Environmental Liability DirectiveDirective

• Law in Europe since April 2007Law in Europe since April 2007– Remediation of Environmental Damage; or Remediation of Environmental Damage; or – The Imminent Threat of Environmental DamageThe Imminent Threat of Environmental Damage

• Applies to;Applies to;– serious damage to EU protected species and serious damage to EU protected species and

habitats or damage to Sites of Special habitats or damage to Sites of Special Scientific Interest (SSSI) Scientific Interest (SSSI)

– serious damage to water serious damage to water – land contamination that adversely affects land contamination that adversely affects

human health.human health.

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RemediationRemediation

• PrimaryPrimary– Return land to original stateReturn land to original state– Physical remediationPhysical remediation

• ComplimentaryComplimentary– Realise full consequence of the damageRealise full consequence of the damage– Used when original site cannot be repairedUsed when original site cannot be repaired

• CompensatoryCompensatory– Replaces loss of interim benefitReplaces loss of interim benefit– Can be at the damaged or alternative siteCan be at the damaged or alternative site

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Equivalency AnalysisEquivalency Analysis

• Quantify RemediationQuantify Remediation

• Economists + Ecologists togetherEconomists + Ecologists together

• Habitat Equivalency AnalysisHabitat Equivalency Analysis– Service x area x timeService x area x time

• Resource Equivalency AnalysisResource Equivalency Analysis– Fish monthsFish months

• Allows time factor to be appliedAllows time factor to be applied

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Liability RegimeLiability Regime

LiabilityLiability• Strict Liability for Annex III ActivitiesStrict Liability for Annex III Activities• Fault Based for all othersFault Based for all others

DefencesDefences• Force MajeureForce Majeure• Authorised ActivitiesAuthorised Activities• Technology at that timeTechnology at that time

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What Types of Company Should What Types of Company Should be Concerned?be Concerned?

• EU IPPC Licensed ActivitiesEU IPPC Licensed Activities• Waste Management Waste Management • Discharges to Surface and GroundwaterDischarges to Surface and Groundwater• Abstraction of waterAbstraction of water• Manufacture and Use of Haz MatManufacture and Use of Haz Mat• Transport of Haz MatTransport of Haz Mat• Use and transport of GMOUse and transport of GMO• Trans-boundary Shipment of WasteTrans-boundary Shipment of Waste

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Lessons from the Rest of Lessons from the Rest of EuropeEurope

• DEFRA July 2010DEFRA July 2010– c. 50 ELD Claims Across Europec. 50 ELD Claims Across Europe– Little information on eventsLittle information on events

• In the UK, 4 claimsIn the UK, 4 claims– United UtilitiesUnited Utilities– Residential Heating OilResidential Heating Oil– Small Chemical SpillSmall Chemical Spill– Road Tanker SpillRoad Tanker Spill

• Many more non ELD Claims…Many more non ELD Claims…

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Augusta Roadstead, SicilyAugusta Roadstead, Sicily

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Camargue, France

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Corby, UKCorby, UK

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Gaps in Existing InsuranceGaps in Existing Insurance

• Gradual pollutionGradual pollution

• Historical pollution eventsHistorical pollution events

• Bartoline caseBartoline case

• Compensatory remediationCompensatory remediation

• Complementary remediationComplementary remediation

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The Role of EIL InsuranceThe Role of EIL Insurance

• Ensures that risk is transferredEnsures that risk is transferred

• Allows the market to adjustAllows the market to adjust

• Covers:Covers:– ELD LiabilityELD Liability– Third Party LiabilityThird Party Liability– Pollution and Non Pollution DamagePollution and Non Pollution Damage

• Includes Insureds “business”Includes Insureds “business”

• Provides Claims SupportProvides Claims Support

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Key IssuesKey Issues

• Environmental risk includes both ELD & PollutionEnvironmental risk includes both ELD & Pollution

• Consideration should be given to:Consideration should be given to:– Existing insuranceExisting insurance– All liabilities (operational but also historical)All liabilities (operational but also historical)– How would an event be managedHow would an event be managed

• Therefore, insureds need to work with:Therefore, insureds need to work with:– BrokerBroker– ConsultantConsultant– UnderwriterUnderwriter

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Contact Details

Duncan Spencer

Liberty Mutual Insurance Europe Limited, London

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