China Forces Compulsory Insurance on Heavy Polluters

Feb. 25 – China’s Ministry of Environmental Protection (MEP) and the China Insurance Regulatory Commission (CIRC) jointly released the “Guiding Opinions on Carrying Out the Pilot Program on Compulsory Environmental Pollution Liability Insurance (huanfa [2013] No.10, hereinafter referred to as the ‘Guiding Opinions’)” on February 21, which forces heavily-polluting enterprises to join an environmental liability insurance system to ensure they can provide adequate compensation for any damages caused.

Enterprises required to participate in the environmental pollution liability insurance can be found below.

1. Enterprises involved in following industries are required to participate in this environmental liability insurance:

• The mining and processing of  heavy non-ferrous metal ore
• The heavy non-ferrous metal smelting industry
• The lead battery manufacturing industry
• The leather and leather product industry
• The chemical raw material and chemical product manufacturing industry

2. Enterprises that have been included in the scope of insurance coverage according to relevant local provisions are required to participate in this environmental liability insurance.

3. Enterprises with high environmental risks are encouraged to participate in this environmental pollution liability insurance, including:

• Petrochemical enterprises
• Dangerous chemicals management enterprises
• Hazardous waste management enterprises
• Dioxin emission enterprises

Guiding Opinions

According to the Guiding Opinions, special environmental protection funds will be allocated to companies participating in the insurance scheme, and such companies will also be given preferential treatment when applying for bank loans. Meanwhile, companies failing to apply for the environmental pollution liability insurance may face negative environmental impact assessments and credit downgrades, which could hamper future development.

The insurance system was introduced in 2007 in an attempt to use a market-oriented approach to tackle environmental degradation and compensate victims for their losses.

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