Liability Insurance for Environmental Pollution will be Enforced

Core notice: Environmental pollution liability insurance is to invite more enterprises to purchase insurance in order to decrease the heavy burden of the compensation borne by few enterprises, so there must be a certain amount of enterprises participating.

Who will pay for frequently occurring environmental accidents?
In reality, since the compensation capacity of troublemakers is inadequate, the compensation is usually paid by local government; sometimes even the victims have to bear the consequences by themselves due to the inadequate finances of some local governments. “We hope to resolve the problem fundamentally by speeding up the establishment of a long-effect mechanism for environmental pollution liability insurance system.” Said Yang Chaofei, director of Department of Policies and Regulations of the Ministry of Environmental Protection, in China Green Policy High-level Workshop held on November 15. Because the effective market demand, technical strength, and system support are not enough, and the sistuation campaign of experimental bodies for environmental pollution liability insurance is always “all talk and no action”.

After the meeting, Mr. Yang told our correspondent that during the period of the “12th Five-year Plan”, an environmental pollution liability insurance system will be rolled out from experimental cities and provinces to the whole country.

The Ministry of Environmental Protection will improve corresponding laws and regulations so as to specify legal status and enforceability of environmental pollution liability insurance at the level of legislation. Yan E from the Policies and Regulations Department of the Ministry of Environmental Protection indicated that the technical articles like Measures for the Administration of Environmental Liability Insurance have been finished and would be expected to be promulgated this year.

The feelings among most enterprises and insurance companies is ‘let’s wait and see’
Yang Choufei described the progress of environmental liability insurance as “walking with difficulty”.

Environmental pollution liability insurance will invite more enterprises to purchase insurance in order to decrease the heavy burden of compensation borne by only few enterprises. That means there must be a certain amount of insured enterprises to achieve the purpose of decentralizing and sharing environmental risks.

However, the correspondent learnt from the attending officials, who are in charge of environmental protection in Jiangsu, Chongqing and Hunan Provinces, that all experimental provinces and cities were confronted with enterprise’s weak willingness to purchase insurance.

He Zheng, deputy director of the Publicity and Education Section of the Department of Environmental Protection of Jiangsu Province, told our correspondent, big enterprises with strong financial resources and risk resistance capacity were not willing to buy insurance because they thought they would not have any environmental pollution accidents, and even if any accident occurred, they can handle it by themselves. Some enterprises with weak risk resistance capacity, low corporate social responsibilities and weak payment capacity were not willing to buy environmental pollution liability insurance, either.

In addition, the low insurance claim ratio, narrow coverage, high premium rate, complicated exemption clauses, and high risk assessment cost, and other factors, to some extend influenced the enthusiasm of enterprises in purchasing the insurance.

Compared with enterprises, insurance companies held a subtler attitude to the new service. On the one hand, the company hoped to occupy the market; on the other hand, they worried that the risks would be too great if only few enterprises purchased insurance. In addition, the problem of “good intentions, but poor technical abilities” also existed.

Most insurance companies and insurance brokerage companies were short of professional departments and personnel in the field of corporate environment risk assessment; whereas the environmental protection authorities and the society have yet to establish a corresponding appraisal agency concerning environmental pollution and damage, or were only established, but lacking a working ability.

Cheng Zhongzhu, Vice General Manager of PICC Property and Casualty CO., Ltd, said frankly, insurance companies currently lacked technical support in specialized sectors, such as corporate risk assessment, pricing of the insured subject, and determining the damages arising from the insured accident.

Seeking a legislative base for administrative enforcement
Xie Li, deputy director of Hunan Provincial Environmental Protection Department, said that the construction of an environmental liability insurance system “must be to a large extent vigorously driven by the government”.

However, what makes the government feel embarrassed was that there was no legal ground behind such a series of administrative measures for enforcement.

At present, at the national level, the only ground for environment liability insurance is the Instruction Opinion on Environmental Pollution Liability Insurance jointlyenacted by the former State Environmental Protection Administration and China Insurance Regulatory Commission, but the opinion has still not been upgraded into law or regulation.

Xie Li said, in order to minimize the resistance, Hunan Provincial Government once considered mandatory insurance, and carried out many discussions on it, but it had to give up due to the lack of legal ground for mandatory insurance.

Cui Fengshan, deputy director general of Wuxi Environmental Protection Bureau, suggested including stipulation on the implementation of an environmental pollution liability insurance system in Insurance Law, or specifying that enterprises with environmental risks must buy mandatory liability insurance upon the amending of the Environmental Protection Law and other related laws and regulations related to environmental protection.

Our correspondent was informed that at the current stage, instead of imposing the insurance on all enterprises, it would be more probable to gradually establish an environmental liability insurance system combining compulsory purchase by legislation and voluntary purchase.

First and foremost, its enforcement was to implement mandatory liability insurance in key industries characterized by heavy environmental pollution and high environmental risks, such as petroleum, chemical, printing and dyeing, cement, papermaking, leather, thermal power, coal gas, nuclear fuel production and the treatment of noxious and hazardous waste.

As for the light-polluting industries such as urban construction, public service and commerce, we should provide active guidance to promote enterprises to purchase insurance voluntarily.

He Zhen proposed, in coordination with the Tort Liability Law of People's Republic of China enacted on July 1 of this year, formulating rules for the implementation of environmental pollution tort liability, and specifying the principles of compensation, subject, scope, criteria, burden of proof, limitation period for claims with regard to environmental pollution damages, so as to provide legal ground for developing environmental pollution liability insurance.

Yang Chaofei indicated that the Ministry of Environmental Protection Department will improve corresponding laws and regulations in order to specify the legal status and enforceability of environmental pollution liability insurance at the legislative level, and it would be possible to append environmental liability insurance to the Law of Atmospheric Pollution under an amendment.

All-round implementation during “12th Five-Year Plan” period
Yang said to our correspondent, during the “12th Five-Year Plan” Period, that the environmental pollution liability insurance system would be promoted from some experimental provinces and cities – Jiangsu, Hubei, Hunan, Shenzheng and Chongqing – to the whole country.

At present, however, our country is obviously incomplete in the aspect of regulations concerning environmental liability insurance. How can we transfer the route of environmental liability insurance from an experiment to comprehensive development?

Some specialists pointed out that, except by forcing enterprises to buy insurance with legal and administrative means, the government should resort to economic measures to establish the environmental liability insurance system. Based on overseas practice, the development of an environmental liability insurance system will be comprehensive, including legislation, allowances, tax relief, government financial gap-filling, risk assessment of the third parties and dispute settlement.

Many experimental provinces and cities like Hunan and Wuxi suggested formulating preferential fiscal and taxation policies at a national level, to properly reduce charges for emission from the insured enterprises, and to have related departments offer direct premium subsidies and preferential treatment of premiums as pre-tax expenditures.

Offer liability insurance companies with large compensation burdens preferential business tax treatment, services, as well as financial and fund support.

He Zhen said to the correspondent, Jiangsu Province was formulating local policies and regulations that are urgently demanded by environmental pollution liability insurance companies, including Entrance Criteria for Insurance Companies and Agencies to Engage in Environmental Pollution Liability Insurance, Accounting Standard on Insurance Premium of Corporate Environmental Pollution Liability Insurance, Assessment Accounting Standard for Environmental Pollution Damages, Norms for Process and Operation of Environmental Pollution Liability Insurance, Regulations on Management and Surveillance of Environmental Pollution Liability Insurance and Codes of Professional Conduct of Environmental Pollution Liability Insurance, the aforesaid six documents would all be promulgated within the year. In the following year, they will initiate and organize the research and drafting of Jiangsu’s measures for the Implementation of Environmental Pollution Liability Insurance so as to improve and complete the policy and standard system for the environmental pollution liability insurance for the entire province.

Yan E from the Policies and Regulations Department of the Ministry of Environmental Protection indicated that at the national level, the Ministry of Environmental Protection was also embarking upon the formulation of supporting technical standards and research into and formulation of assessment criteria for environment risks or technical specifications for risk rating, and compensation standards for pollution damages. (data sources: the website of 21st Century).