Environmental Liability Directive call for development of financial instruments: the issue of compulsory insurance

Abstract

Motivation: Compulsory insurance is one of the possible optional responses to the Environmental Liability Directive (ELD) call for development of financial instruments. The article is a contribution to the analysis of the development of financial instruments relating to environmental liability. The above has been continuously discussed in both local and European circles. Aim: There are two research purposes of this article. Firstly, to identify the attributes of the EU countries which have implemented a system of obligatory environmental insurance. Secondly, to recognise and assess the premises for introduction of a system of obligatory environmental insurance by the example of Poland. Results: Insurance obligation has been legitimised in relatively poorly developed countries of the European Union. Economic indicators (GDP, GDP per capita) in majority of the above are usually below the EU average. Also, the attributes of insurance markets (non-life insurance gross premium written, non-life insurance density and insurance penetration rates) in these countries are the evidence of a large discrepancy between them and the highly developed markets. Overall economic indicators for Poland and the attributes of the Polish insurance market put this country (in economic terms) in the group of states which have decided to introduce obligatory environmental insurance. Simultaneously, the doctrine and practitioners alike consistently criticise ‘inflation of obligatoriness’ which has been seen in the Polish regulations for decades and indicate disadvantages of such solution. Possible introduction of environmental insurance obligation, if considered in Poland, should be preceded by action taken in order to strengthen the supply side of the market. Only in this condition will it be possible for obligatory insurance — if flexible enough in its structure — to strengthen the incentives for market development on the demand side.