In the light of the devastating effects they can exert, industrial disasters have become a major concern for European citizens and political leaders alike.

There is no reason to be surprised by this development; it rather seems logical in a world characterized by growing competition between emerging countries and traditional industrial leaders, continuous innovation and investment in industrial areas dealing with hazardous substances, and ever increasing volumes of production.

In highly industrialised countries, legislative institutions and competent authorities all do their best in order to ensure a high level of security within and around establishments with high risk profiles — but all these efforts still proved insufficient to prevent industrial disasters of extraordinary magnitude from happening in Japan (Fukushima, 2011), Hungary (red sludge catastrophe of Kolontár, 2010), France (AZF disaster of 2001) or Romania (cyanide catastrophe, 2000).

On the one hand, it seems evident that industrial disasters tend to increase in magnitude and become a more serious threat than in the past. On the other hand, we also see a growing sensitivity of European public opinion concerning the issues of industrial security, and a clear expectation towards political leaders who undoubtedly dispose of all necessary means to intervene with the objective of ensuring a higher level of security all over Europe, and creating a remediation capability based on European co-operation and solidarity.

What are the lessons drawn from the most recent disasters in Europe? As a matter of fact, they are profound and multiple.

First and foremost, we can clearly see that the magnitude of damages caused by major industrial accidents can exceed by far the financial capacity of the enterprise having caused or deemed responsible for it. In the case of Kolontár, the remediation cost value of about €115 million lies far beyond the real capacity of the industrial actor concerned. If we compare this amount with the €2 billion damage value of the 2001 Toulouse catastrophe (AZF), then we can easily see the limits of the "polluter pays principle". It is not at all a rare phenomenon that a major industrial actor simply goes bankrupt, having no other choice than closing down its activity in consequence of a large-scale industrial disaster of unexpected magnitude. With the concerned actors shutting down industrial activity, the polluter pays principle becomes meaningless. The financial burden of remediation is transferred to the national budget, and eventually to the taxpayers.

A development of this kind is not only prejudicial to the member state budget, it is at the same time harmful for employment and competitiveness. Instead of solving a problem, bankruptcy creates further problems in the local and regional context, and thus represents a possible starting point of a vicious circle. State budgets are in fact subject to a double stress effect: on the one hand, the remediation costs of the industrial disaster have to be financed using budget resources, and on the other, unemployment benefits for the employees of the industrial company facing bankruptcy will also be drawn from the budget.

The second lesson becomes obvious by looking at the situation of the private insurance sector, which is already partly involved in remediation cost financing due to the current enforcement of the Environmental Liability Directive. However, as most professionals correctly point out, insurance premium calculation related to environmental damages caused by large-scale industrial accidents is extremely uncertain due to the lack of historical data and the special risk profile of the damage events concerned. Without a solid set of historical data, gained from past experience, and a robust calculation method adjusted to present needs, the product offer will remain insufficient and underdeveloped for a long time. Insurance companies cannot accept risks of unknown magnitude, involving high financial exposure. 

As a consequence, the private insurance sector does not offer full coverage for damages related to industrial accidents presently, and will not do so in the near future.

The third lesson concerns the limits of budgetary flexibility under the conditions of the sovereign debt crisis currently sweeping across the EU. It is clear that industrial disasters present a nature of unexpectedness, and the amount of financial resources needed is unknown in advance. We also have to bear in mind that in the future, Member States will face higher constraint and more severe rules with regards to the authorized deficit. How to combine both requirements then, and keep the deficit low while satisfying the legitimate requirement of a quick and efficient disaster remediation, expected by the population affected after an industrial accident?

The solution is clearly not at state but at European level. It should be based on four key principles: 1) It is not justified to impose further burdens on citizens in the current context of rising taxes and decreasing purchasing power. 2) Nor is it justified to transfer the financial burdens of industrial disaster remediation to member states' budgets already under significant stress. 3) It is both justified and appropriate to ensure industrial disaster remediation financing on the basis of contributions paid by the European industry. 4) The European private insurance sector should be encouraged to develop new and innovative products designed to meet the needs of the future, and supported by a backbone system created in the form of a new European instrument covering major hazards.

What Europe needs is an EU-wide risk-sharing community of industrial actors, designed to meet the needs of future challenges related to major industrial disasters. European industry is sufficiently strong to provide for a solid financing scheme preventing actors of any size from going bankrupt after industrial accidents, and the population affected from drawing on state budgets.

Following positive feedback by members of the European Commission showing a great sensitivity to industrial safety and environment protection, the Hungarian government recently came up with a proposal aimed at the creation of a new European industrial disaster risk-sharing facility financed by a compulsory insurance premium harmonised at European level.

The set-up of the facility could represent the first step towards the creation of a two-tier insurance system, with a European pillar (the facility) and a national pillar (based on private insurance products available on the market). I am convinced that the facility should also play a role in the context of industrial disaster prevention on the one side, and promotion of investments in security systems and environment protection equipment on the other, since these aspects are strongly interlinked. If we go along this road, we can create a situation advantageous both to industry, private insurers and national budgets, and at the same time creating a real answer to the legitimate concerns of citizens.