More NewsMultinationals Urged to Monitor Environmental Risk Exposures

Multinationals Urged to Monitor Environmental Risk Exposures

Risk and insurance managers of multinational businesses should assess how they insure cross-border environmental impairment liability risks, as the exposures they face continue to change says the property/casualty insurer ACE Group.

The recommendation comes at a time when the legal frameworks for environmental protection have been strengthened in many countries. Individual directors and officers of companies have become increasingly exposed to civil and criminal liabilities resulting from environmental incidents in many markets.

Responding to the changing risk environment, ACE and international law firm Clyde & Co have published a report for insurance managers and brokers, entitled
‘Structuring multinational insurance programmes – Identifying challenges and solutions for multinational environmental impairment insurance programmes’
.

The report highlights the US, European Union (EU) and Australia as examples of jurisdictions with extensive regulations that have changed recently. It emphasises that change is often fastest in emerging markets (EMs) with China, India, Thailand and several Latin American countries including Brazil, Mexico, Panama, Colombia and Peru all establishing legal frameworks in place.

The report also highlights that, in many countries, laws expose corporate directors and officers to civil or administrative liabilities and criminal offences as result of environmental incidents, including Australia, Canada and the US. Additionally, it identifies a trend by legislators towards enacting civil and criminal offences of strict liability, which can be established without any need to prove intent or negligence on the part of the individual.

Suresh Krishnan, executive vice president (EVP), global accounts at ACE said: “We operate in an evolving and increasingly complex global legal landscape with many emerging market policymakers, in particular, becoming increasingly sensitive to the environmental footprint of multinational corporations (MNCs) operating in their countries and expecting them to demonstrate financial responsibility for their environmental liabilities.

“In many countries, an appropriately structured global environmental impairment insurance programme can help companies to meet these responsibilities. However, it is important for risk and insurance managers and their insurance partners to think carefully about the programme structure that will best perform for their environmental impairment liability needs.

“Keeping a close eye on changing developments will be increasingly important in helping companies gauge whether they have appropriately structured their local policies to satisfy local regulations and have adequate excess or umbrella policy limits to cover any unforeseen gaps.”

Karl Russek, senior vice president for environmental risk at ACE Overseas General, added:

“Companies might not realise that pollution liabilities arising from their day-to-day operations may not be covered by traditional general liability and property insurance programmes in many countries, while liability exposures for directors and officers arising from environmental incidents may be changing.

“Given recent high-profile pollution incidents and an increasingly complex web of environmental laws and regulations around the world, the focus on environmental liability issues is only likely to grow and at ACE, we are seeing increasing demand from risk and insurance managers for robust multinational insurance programmes in this important and changing area of risk.”

The report can be downloaded
here
.

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