The current demand for the insurability of liability for damage to the natural environment

E. Vávrová
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E. Vávrová: Department of Finance, Faculty of Business and Economics, Mendel University of Agriculture and Forestry Brno, Czech Republic

Agricultural Economics, 2009, vol. 55, issue 1, 33-39

Abstract: Since 2004, the basic document which has governed liability for damage to the natural environment in the European Union is the Environmental Liability Directive No. 2004/35/EC, as amended by the subsequent regulation No. 2006/21/EC. The main purpose of the legislation was to ensure that the entity responsible for the damage pays all costs for rectifying its consequences. If it concerns damage to natural environment, the operator must undertake measures for rehabilitation, replacement and regeneration of the damaged natural resources. The primary replacement, which returns the damaged natural resources to their original state, may be differentiated from complementary replacement as compensation in the case in which the primary replacement has not provided an adequate reparation, and finally compensatory replacement - compensation for the temporary loss of natural conditions. This paper aims at an analysis of the possible means for eliminating risks due to the liability for environmental damage caused by the actions of an operator whose activities potentially threaten natural environment and may cause the biodiversity damage. Risks are assessed with regard to the risk insurability criteria for potential damage to the natural environment. The importance of risk management is stressed in the sophisticated form known as the Enterprise Risk Management. Risk management is becoming increasingly important as a part of the Solvency II concept, currently in preparation, whose first and second pillars accentuate risk management in financial institutions and the consistent quantification of the obvious, hidden and potential risks.

Keywords: insurance market; commercial insurance company; insurance product; environmental insurance; insurability; liability insurance; risk management (search for similar items in EconPapers)
Date: 2009
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Persistent link: https://EconPapers.repec.org/RePEc:caa:jnlage:v:55:y:2009:i:1:id:2505-agricecon

DOI: 10.17221/2505-AGRICECON

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