The Ministry of Environmental Protection and China Insurance Regulatory Commission jointly issued a guideline on piloting compulsory liability insurance for environmental pollution. The guidelines specify that enterprises of the three categories must be forced to take out compulsory social and environmental pollution liability insurance, otherwise they will be affected in environmental impact assessment, credit and other aspects. Industry insiders said it is a useful attempt to use market means to prevent and control environmental pollution, and will regulate hazardous waste treatment behavior of high-polluting enterprises.

Insurance is given priority for credit support

The Opinions make it clear that the enterprises involved in compulsory insurance include those involved in heavy metals, those that have been covered by insurance according to relevant local regulations, and other enterprises with high environmental risks.

Companies that should take out insurance but fail to do so in time will be constrained in several ways. First, whether an enterprise is insured should be closely combined with the implementation of such systems as the examination and approval of environmental impact assessment documents of construction projects, the examination and approval of application for environmental protection acceptance upon completion of construction projects, the examination and approval of compulsory cleaner production, the issuance of emission permits, and the listing of environmental protection verification. Second, we will suspend the processing of enterprises' applications for special funds for environmental protection and heavy metal pollution prevention and control. Third, the information of enterprises that fail to insure according to regulations should be provided to banking financial institutions in a timely manner, as an important basis for customer rating, credit access management and withdrawal.

The Opinions set out the incentives for insurance. For example, when arranging special funds for environmental protection or heavy metal pollution prevention and control, pollution prevention projects of insured enterprises are given preference. The insurance information of the insured enterprise shall be timely reported to the banking financial institution, which shall give priority to the credit support in accordance with the principle of controllable risks and sustainable business.

Market means to restrain environmental pollution

Fu Tao, director of the Institute of Environmental Protection Industry at Tsinghua University's School of Environmental Sciences, said that compulsory environmental insurance is an effective supplement to administrative measures to achieve environmental protection goals by using economic means. It will help change the pattern of "cat-and-mouse" in environmental protection work in the past. Insurance can effectively quantify environmental costs.

Zheng Wei, a professor at Peking University's Department of Risk Management and Insurance, said the direct impact of compulsory insurance on the insurance industry would be an increase in the volume of the insurance business.

Zheng Wei believes that the use of market means for environmental pollution constraints will have a better effect. At present, the biggest problem of domestic environmental pollution is that there is no subject to deal with it after pollution. This insurance measure will guarantee compensation after pollution. What is more meaningful is that before pollution occurs, the insurance company will assess the pollution risk. This is equivalent to releasing a market signal that can be judged, standardizing the company's pollution and waste treatment behavior, purifying industries involved in heavy metals and so on.