It is imperative for Directors to ensure that their company has the suitable insurance coverage; otherwise, they may face personal accountability, potentially resulting in a D&O claim. In these scenarios, the Directors’ responsibility aligns with other cases, as do the ensuing consequences.
As the EU strives to reach stringent environmental targets more and more laws are being introduced to ensure countries in Europe are working rigorously towards achieving them. One of the latest waves of regulations affects waste management across the continent. As a result, countries are making changes to their existing waste management rules and looking for new insurance solutions to cover the risks. Hungary is no exception, and as part of changing Hungarian regulations the government recently issued a decree on environmental protection insurance obligations. We explore the reasons behind the decree, who they effect, the limits imposed and whether there are any restrictions on which insurer companies can use.
What is the intent behind the decree?
The decree aims to establish a financial framework to address potential environmental pollution damage. In instances where environmental fines are levied by authorities due to waste management activities, these fines are utilised to fund the cleanup of environmental damage. Consequently, waste management companies covered under specific insurance contracts can rely on the financial stability of the insurance company, subject to the terms outlined in the contract.
For whom and with what limit?
Pursuant to the decree, as of 1 January 2024, waste-producing economic enterprises whose annual volume of waste generated and owned at any site exceeds the following amounts:
a) over 200 kg in case of hazardous waste,
b) over 2,000 kg in case of non-hazardous waste, except as provided for in point (c)
c) over 5,000 kg in case of non-hazardous construction and demolition waste
must take out mandatory environmental protection insurance to the value of at least 10 million HUF per insured event and per period. Regardless of the number of locations, the organisation is obliged to take out only one environmental protection insurance policy for all its sites. It is important to point out, that there is no difference between waste producers and waste managers in this respect; the same conditions apply to both activities.
Nevertheless, if a company carries out several waste management activities under different permits, insurance must be taken out for each activity separately. However, if the client carries out several waste management activities under a single permit, these can be covered by a single insurance policy. In this case, the insurance amount per activity will be calculated and the largest of them will be insured. The territorial scope of the insurance must cover the area of the authorised or registered activity. This is crucial because the insurance covers environmental damage caused by malfunctions in Hungary as well as damage resulting from insured activities at all domestic sites. This damage may affect:
Which insurer?
As a rule, environmental protection insurance provided by an insurer whose headquarters are in a member state of the European Economic Area or the United Kingdom can be accepted.
Environmental protection insurance provided by another insurer can only be accepted if an insurer based in a member state of the European Economic Area or the United Kingdom is eligible.
Reporting and deadlines
According to the Act on Waste, any organisation obliged to take out environmental protection insurance must certify that it has taken out the requisite environmental protection insurance, financial collateral or provision, to the government’s waste management authority by the 31st March of the year following the end of the business year.
Any organisation found to violate the new law will be required by the waste management authority to pay a fine in accordance with the government decree established for enforcing this legislation. It is imperative for Directors to ensure that their company has the suitable insurance coverage; otherwise, they may face personal accountability, potentially resulting in a D&O claim. In these scenarios, the Directors’ responsibility aligns with other cases, as do the ensuing consequences.
As with any changes to regulations, if you are unsure about how the new decree effects your business, the best course of action is to talk with your insurance provider who will be able to advise you on next steps.
Norbert Kovács
Specialist Liability & Financial Lines
GrECo Hungary
Insured by Algorithms
The insurance industry is undergoing a profound transformation, driven by the rapid adoption of AI and predictive analytics.
Beyond Moving Cargo: Why Employee Well-Being Is the Real Asset in Logistics
In today’s employee-driven market, especially for Gen Z talent, benefits aren’t just perks – they’re strategic tools for attraction and retention
The New Edition of FORWARD Magazine Is Now Available
GrECo is proud to present the latest edition of our client publication, FORWARD Magazine—now live and ready to explore.
