ELD in CEE: As Seen by Swiss Re

Balint Putnoky, senior client manager Hungary, Swiss Re

What is the traditional insurance and reinsurance coverage conditions for environmental liability and industrial property risks in CEE?

For highly exposed industrial risks property insurance coverages are still oftentimes not according to Western standards in the CEE region. In many cases sums insured are calculated on book value, limited risk surveys are conducted and more comprehensive covers, e.g. BI, are only slowly picking up.

Liability insurance standards are in most cases based on historic loss experience, neglecting increasing exposures from rising claims awareness, revised liability regimes and technological and economic progress. On the reinsurance side we therefore prefer to cover such complex risks on a facultative basis, where we can assure a dialogue and a proper assessment of the risk.

Does Swiss Re expect a change in pricing and conditions in the CEE segment following the MAL disaster?

In consequence of the loss the risk awareness as well on the insured´s and on the legislation side will increase. There is a call for higher liability coverages for specific activities and a well functioning risk management, and eventually even compulsory covers. Swiss Re especially sees a chance that the loss will trigger an increased demand for ELD covers in the CEE markets, which are currently not widely sold as industry demand remained low up till now. Many insurance companies however are prepared to offer the coverage based on best practice and products already introduced in other markets. Following the sludge spill we already see an increased demand for facultative coverages for such risks.

ELD in CEE: As Seen by Munich Re

Harald Etzdorf, senior underwriter, Casualty Facultative, Munich Re

It is difficult to make any general comments in respect of the coverage of environmental liability in Central and Eastern Europe, as this topic is handled different in every country. The awareness of environment protection and all questions connected with it are not yet a central topic in all countries. In April 2007, a new environmental liability directive was due to be transposed into national law throughout the EU. We expected by then that the individual markets in the EU would be looking for innovative insurance solutions in this field as a result of this directive, but these expectations were not fully met. There will be a report by a EU commission this year about the respective developments since 2007 in the Member States. Maybe the accident in Hungary will put more pressure on national legislations to put more emphasis on environmental protection as well as insurance solutions and protection. In CEE countries outside the EU, it does not look any better. Insurance products for environmental liability do not exist in every country.

ELD in CEE: As Seen by Guy Carpenter

Hamish Dowlen, senior vice-president, Central and Eastern Europe, Guy Carpenter

What is the traditional insurance and reinsurance coverage conditions for environmental liability and property industrial risks in CEE?

In the Hungarian market, as is common in many Central and Eastern European countries, the liability coverage is combined within a general third party liability policy and therefore coverage for an event such as this recent one in Hungary would be covered under the sudden/accidental liability section. In some cases such section is sublimited, but it is unusual to have a specific policy for environmental third party liability. In general, policy limits are quite low, even for larger industrial risks. The European directives regarding environmental liability have yet to be implemented in most of CEE and, as such, such coverage is not yet a major topic in the region and insureds are not required by the regulator to purchase such cover within the liability insurance policy.

Does Guy Carpenter expect a change in pricing and conditions in the regional segment following the MAL disaster? What specific aspects of the contracts could be affected?

Despite the magnitude of the event, the insured loss is very small and Guy Carpenter does not anticipate it having a significant effect on pricing or conditions for liability insurance in the CEE region. However, it is likely that risk managers within larger industrial enterprises in the region may review their likely PML scenarios and discuss with their insurers or brokers whether higher limits of indemnity for certain types of loss scenario are necessary and available within the local market. More specifically this may focus more interest on the environmental liability from industrial insureds and the coverage that they have within their existing policies.