Pilot project to test mandatory pollution insurance

China is considering making environmental liability insurance mandatory for companies that pose high pollution risks in a bid to curtail hazards to air, land and water, the national environmental watchdog said.

The Ministry of Environmental Protection developed a draft plan in some pilot regions, and it is soliciting suggestions from insurance companies and environmental protection authorities.

The proposed insurance targets companies in sectors that pose a high risk of discharging pollutants into the environment, and covers the costs of cleanup after the contamination of air, water or land due to accidents involving hazardous substances.

It was presented at a seminar in Shenzhen, Guangdong province, on Monday.

The central government issued a guideline in September suggesting compulsory insurance, in line with its eco-civilization objectives.

Many researchers and officials at environmental protection bureaus attending the seminar supported making insurance compulsory, but also agreed it's difficult to implement and expand the insurance considering the current slow progress and lack of enforcement.

China undertook a pilot project to promote voluntary liability insurance in 2007 and expanded it to cover the whole country in 2013.

However, many companies listed as a high-risk for polluting the environment refused to buy the insurance, and the insured rate in some regions has decreased in recent years, said Lai Xiaodong, deputy head of the policy office at the ministry.

There is a lack of regulation to compel companies to buy insurance, Lai said. Thus the market for such insurance has grown slowly.

"In the first three quarters, the total insurance premiums for liability insurance was around 70 million yuan ($11 million) in 11 provinces," said Shen Xiaoyue, head of the policy office at the Policy Research Center for Environment and Economy, the ministry's think tank.

One criticism of the insurance in the past has been that companies found it hard to draw on the insurance after accidents. For example, the compensation rate for the insurance was only 4 percent of the money claimed in Sichuan province - very low to reduce the companies' losses, said Li Xuan, a researcher at the center.

"To improve the draft for better implementation in the future, we should solve several major problems first," said Shen.

Such problems include which companies are considered to pose high pollution risks, the type of insurance products for companies and the enactment of laws to force companies buy insurance.

zhengjinran@chinadaily.com.cn