Green Insurance is Here

Green Insurance is Here Compartir

(article published in Canarian Weekly 30th April 2010)

Spanish Companies finally go green. From today (30th April) environmental law in Spain gets tougher and "polluter pays and repairs" principle applies, extending the responsibility of companies to repair damage caused by pollution and restoration of natural resources to the state it was before the damage. Companies are now obliged to have a financial guarantee or to take a green policy for environmental liability.

Green legislation promoted by the Spanish Government is becoming more restrictive: around 30,000 companies in Spain will know today that they have to hire a mandatory financial guarantee or a green insurance to follow the implementation of the Environmental Liability Act 2007.

But this shouldn’t be new to companies, since the law 26/2007 dated 23 October on Environmental Liability was published on 24 October 2007 in the Official State Bulletin (BOE), and aimed to transpose European Directive on Environmental Liability which seeks to achieve the prevention and remedying of environmental damage. The Directive allows individual member states a degree of flexibility in determining how they develop their own national legislation, specifically to whom strict liability will be applied and the requirements for financial security/insurance.

The legislation extends the principal of "who pollutes, pays" to "who pollutes, repairs." In other words, payment for damages will not suffice. Going forward, natural resources will have to be restored to their original state. To achieve this, the Law intends: to reinforce preventative mechanisms and to avoid adverse consequences to the environment, to ensure the repair of environmental damages derived from economic activity, including cases that are deemed legally compliant and whereby all available preventative measures have been carried out, and to guarantee that the prevention and repair of the environmental damages are paid by the responsible party and not by the Public Authority.

The Law applies to environmental damage caused by the economic and professional activities outlined in Annex III (Strict Liability). This includes combustion facilities, oil and gas refineries, metal smelting and transformation, mineral industries, chemicals, paper and cardboard, textiles, waste management, collection and damming of water, and the transportation of hazardous goods. Furthermore, the new Law is applicable to any type of company, (including those not outlined in Annex III), found guilty of negligence or misconduct.

Those companies with business practices included in the new Law are required to adopt preventative and repair measures against predetermined environmental damages and to pay their costs if found responsible for such damages, regardless of the amount.
The Law establishes a joint and several regime. Responsibility is extended to the parent company in the event abuse of the Law or the legal body by its subsidiary occurs. Furthermore, the subsidiary’s responsibilities extend to directors and officers, whose actions cause environmental damage, as well as trustees in insolvency and liquidators of legal entities.
In order to comply with the economic requirements of the Law, companies should contribute to a financial guarantee, either through an insurance policy, a bond, or by constituting a technical reserve. These guarantees will have various limits up to €20 million.

A State repair fund for environmental damages was created to settle the costs incurred from the prevention and repair measures of public properties owned by the State. This fund is under the charge of the General Budget of the State and is administered by the Ministry of Environment.
The Consorcio de Compensación de Seguros administers a compensation fund that will be funded by a surcharge on insurance premiums paid by commercial entities. The purpose of this fund will be to extend the insurance coverage to damages caused during the enforcement period, but only discovered during the following year. These maybe claimed for up to three years after the expiration date of the policy.
Major violations will be penalized with fines of up to €2 million. As the financial guarantee provision of the legislation will be required from today, we recommend considering environmental insurance programs, which adhere to the new legal requirements.
In response to this new legislation, Zurich Insurance, one of the world's leading risk and insurance company, has created a product that is capable of complying with the responsibilities outlined.

To learn how the new law may affect your company's insurance placement strategies, or the options you have to successfully manage your environmental risks, please contact your local Zurich representative. We will be pleased to help you with customized solutions.
Zurich helps companies in many industries navigate the ever-changing world of environmental risk, whether it’s stricter government regulations, intensifying consumer concern on environmental issues, or protecting new assets. We provide your business with easy-to-understand, cost-effective environmental insurance solutions, where you can customize your policy for today’s needs. And adjust in the future when new risks arise.

Contact the Author for more information or to get a personalized quote