Environment, Consumer Pressure May Affect EU Markets

Growing support for protecting the environment in Spain and France is likely to impact local European insurance markets, Guy Carpenter & Company, LLC, said in a recent report.

Another issue likely to have a major impact is growing support for adoption of class action legislation in Italy, the report said.

Both trends "merit close attention by casualty insurers and reinsurers," said David Lewin, a managing director at Guy Carpenter.

Because consumer protection groups are expected to exert pressure for the introduction of punitive damage provisions once the law takes effect, passage of class action legislation in Italy will affect local markets, Mr. Lewin said.

The new class action rules are expected to enter into force July 1, six months after a Financial Act was passed by the Italian Parliament. This legislation provides guidelines for the economic manager of the government and toughens the nation's consumer protection laws significantly.

The report cautions, however, "further postponement cannot be ruled out as the debate is ongoing."

The report, Recent Legislative and Judicial Trends in Continental Europe Affecting the Casualty Insurance Industry, was prepared in conjunction with the Continental European offices of international law firm DLA Piper.

It provides a concise overview of key legal and legislative trends in Continental Europe on a country-by-country basis, examining issues impacting or expected to impact insurers and reinsurers in the near future.

On environment issues, Spain has become the first member of the European Union to adopt an EU directive, allowing countries to impose a financial guarantee obligation on companies whose industrial activities have caused environmental damage. This decision is likely to impact the local insurance market, the report said.

The legislation allows the Spanish government (and the Autonomous Regions) to gain control over operators whose industrial activities have caused environmental damage, requiring them to pay for or remedy the damage.

"This aims to allow an increased level of prevention and precaution between the operators, which will have an impact on the Spanish insurance market," the report said.

In France, the report notes a growing influence of pressure groups and non-governmental organizations in relation to environmental damages in the country, driven in part by the Erika oil spill case of December 1999.

The Erika was a tanker which broke in half and sunk off the coast of Brittany, releasing thousands of tons of oil, killing marine life and polluting approximately 400 kilometers of coastline in one of France's worst environmental disasters.

Total SA, an oil company headquartered in Paris, France, which had chartered the single-hulled vessel, was fined in January by a Paris court and ordered to pay, along with other parties, damages to France and local governments.

"This decision is significant because it recognizes the existence of an ecological loss "resulting from damage caused to the environment," that gives rise, for example, to a right of recovery by environmental/communal organizations," the report said.