The European Council of Ministers has voted down proposals to include compulsory financial guarantees in the EU's Environmental Liability Directive.
The Directive, which was amended by the European Parliament in May to include compulsory financial guarantees, could have led to the imposition of compulsory environmental liability cover.
But in a move welcomed by the insurance industry, the Council of Ministers has instead opted for voluntary financial assurances.
Royal & SunAlliance technical insurances manager Phil Bell applauded the latest decision.
"It's a great victory for the insurance industry," he said. Following the decision, the amended Directive will return to the European Parliament for agreement.
Bell, who is also chairman of the Comité Européen des Assurances environmental liability committee, said the decision left insurers free to develop a wider range of more flexible products to underwrite environmental risk.