China is set to make environmental insurance mandatory for businesses that fall into eight categories - or else they will face fines, it has be reported.
The Ministry of Environmental Protection and the China Insurance Regulatory Commission (CIRC
) issued draft legislation last week which will require polluting firms to purchase the cover or face fines of up to 30,000 yuan (US$4,400).
Companies that work in heavily polluting industries such as mining, hazardous waste disposal and pharmaceutical production will be required to buy cover in a bid to help the country deal with pollution.
Insurers in the environmental market will also be required to issue an environmental risk assessment before signing insurance contracts, ECNS reports. Insurers will be exempt from providing compensation in cases involving natural disasters, environmental pollution crimes, illegal discharge of pollutants or unforeseen environmental safety hazards.
“With the new requirements on environmental insurance, the Communist party has taken a direct step to bridge these contradictions, at once enforcing market demand and ensuring that companies can adequately provide compensation for pollution-related damages,” Alexander Gordon of Aon
Risk Solutions said in a post on the Aon
“While environmental insurance penetration has remained low in China, the recent decision to force the heaviest polluting industries to purchase environmental insurance speaks to a new profound attentiveness to environmental risk.”
China follows the lead of South Korea which made a similar decision on mandatory environmental cover several years ago.
The proposed guidelines are open for public feedback until July 10.
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