Dr. Thomas Arnoldt

New life for old equipment

Television sets, computers, refrigerators, washing machines, and toasters: such appliances have had to be disposed of separately in Germany since March 2006. Manufacturers and importers are now obliged to take them back and recycle them. Munich Re has developed a bond insurance to cover the costs of recycling which will support the recycling industry and help to maintain its viability.

At least four kilograms of electrical and electronic scrap per capita are expected to be fed back into Germany’s material cycle every year. Unwanted or defective computers, energy-saving bulbs, freezers, mobile phones, mixers, shavers, vacuum cleaners, and video recorders are no longer to be thrown away with the household refuse but must be taken to one of the country’s 1,500 municipal collection centres.

Individual duties are itemised in the Electrical and Electronic Equipment Act (ElektroG). This Act translates into German law the requirements to be met throughout Europe stipulated by the EU Directives 2002/96/EC on waste electrical and electronic equipment (WEEE) and 2002/95/EC on the use of hazardous substances in electrical and electronic equipment (RoHS).

The aim is to recycle material more extensively and thus relieve the burden on the environment. More than a million tonnes of electrical and electronic scrap accumulate in Germany every year, sometimes with highly toxic constituents.

Manufacturers addressed by the law

Private consumers do not incur any costs since it is the manufacturers, importers, and dealers of equipment who are addressed by the law. They must take the products back free of charge and recycle them in accordance with the current state of the art. The law covers many different kinds of electrical and electronic appliances. Product responsibility rests first and foremost with the manufacturers. A manufacturer is defined as an entity that manufactures its own equipment or assembles equipment produced by other firms and places it on the market under its own brand name.

Anyone who imports equipment or exports it to another EU country for sale to users also qualifies as a manufacturer. Distributors like supermarkets or retailers that sell equipment made by unregistered producers are also considered manufacturers under the law and thus have the same obligations as manufacturers.

The collection centres for scrap equipment are set up by municipal authorities, whilst appropriate containers are supplied by the manufacturers. Collection is coordinated by the Stiftung Elektro-Altgeräte Register (EAR) in Fürth.

Under the supervision of the Federal Environment Agency, the EAR monitors the manufacturers and importers to make sure they all meet their obligations. All new equipment must be labelled; household appliances, for example, bear a symbol showing a crossed-out household refuse bin.

The law penalises violators, for instance, by forbidding the sale of equipment made by unregistered manufacturers. Public authorities may order dealers to strike such products from their lists. Around 10,000 manufacturers and importers are affected.

Fines are also imposed on manufacturers if their disposal contractors do not collect the containers from the collection centres in good time or if they violate other duties under the ElektroG.

Recycling guaranteed by insurance

To ensure that they are able to bear the costs of taking back their products, the manufacturers must deposit an insolvency-proof financing guarantee with the EAR. Munich Re has developed a specially tailored product to this end: bond insurance for the costs of recycling.

This bond insurance product is offered by way of special processing companies which provide not only the service but also take over the portfolio management. For companies represented by the Central Association of the German Electrical and Electronics Industry (ZVEI) these services are offered by Aon Credit. It has developed a dedicated internet platform for potential customers to take out their insurance cover online.

Great Lakes (UK) acts as primary insurer and passes on the risk in full to Munich Re. For Munich Re, the risk would be triggered by a so-called "guarantee case", which would only happen, for instance, if a market for electronic toys or large household appliances ceased to exist.

With this innovative product, Munich Re has come yet another step closer to fulfilling its goal of supporting commitments to sustainability in all branches of industry.

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