Marsh: Environmental Liability Concerns Top Risk Management Agenda

March 19, 2010

“The heightened environmental liabilities created by recent European Union (EU) and UK environmental legislation were among the top risk management concerns raised by delegates at this week’s Base conference in London,” according to Marsh.

The presentations focused on environmental risk management for business. “David Edwin, a Managing Consultant from Marsh’s Environmental Practice, detailed the increasing prevalence of environmental risks,” said marsh. “In particular, the EU’s Environmental Liability Directive (ELD), which is based on the ‘precautionary’ and ‘polluter pays’ principles. These regulations put the onus on the operator of “any potentially polluting or environmentally damaging activity to take proactive action to prevent and, where necessary, remediate any environmental damage caused.”

Edwin explained: “Environment risks are key business risks and are present at every stage of the business life-cycle – from high-risk activities conducted on-site, to legacy issues arising from previous mergers and acquisitions. Delegates at the conference clearly believed that environmental issues have affected their business and are looking at ways to assess, manage and mitigate the potential liabilities.”

The ELD has created significant new risks for organizations. For the first time, the value of the environment as a resource is recognized under law. “However, Marsh warned, “liabilities created by the Directive are unlikely to be covered by a standard third party liability or property insurance policy, and may even be specifically excluded. As environmental remediation can be extremely costly, organizations should evaluate their potential exposures and assess whether specialist environmental insurance is required.”

The bulletin also indicated that many insurers have imposed “pollution restrictions on public liability insurance policies, either as total pollution exclusions or ‘sudden and accidental’ cover only. Typically, public liability insurance will not cover own-site (first party) clean-up or clean-ups enforced by statutory authorities.”

Edwin added: “Due to far-reaching implications of such legislation as the ELD, many firms should consider the use of specialist insurance products to protect themselves against the costs associated with pollution and environmental damage and the clean-up for which they will be liable.”

Source: Marsh – www.mmc.com or www.marsh.com

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