If insurance protects practically everything, how could they not also protect the environment? Not only do they do it, but in Spain, in addition, insurers have agreed to do it jointly, through a Pool of Companies, which allows them to join forces to detect risks and deal with them if they occur. About all this, we have spoken with the president of the Pool of Environmental Risks, Santiago Martín.
What does the Spanish Environmental Risk Pool consist of, and why is it necessary to exist?
The Pool is an agreement by which 25 insurance and reinsurance companies obtain:
to. Share environmental risks: Each incident has less weight in the technical results of each of them.
b. Accumulate the experience of each case for the benefit of all of them and their clients.
c. Specialize a single team to manage these risks effectively and be of maximum help to everyone in the event of an accident.
All this is necessary because:
to. Sharing the risks is the basis of the insurance activity so that a single loss cannot harm the technical results.
b. Statistical experience is the basis for calculating the technical conditions of insurance and chase saving accounts; without it, the terms would be set by mere speculation. There was no history when the Pool was born, and, even today, twenty-four years later, the statistical bases are very scarce.
c. Finally, specialization is essential to provide an excellent service to clients at risk like this. An accident forces the insured to face the repair (not merely compensation) of environmental damage.
What is considered environmental damage? Is it any damage to a natural environment, or must it be a natural environment with specific characteristics, such as being a protected area?
Environmental damage is that which is caused to a protected area or species, but also that which is caused to the waters, the coastal zone, or the soil, causing their contamination.
Some of the most complex incidents we have managed have been caused by contaminating the soil in the center of a town.
You don’t have to be near a protected area to incur environmental liability; Some of the most complex and costly claims we have managed have been caused by contaminating the soil in the center of a town.
What are the main environmental risks that currently exist in Spain?
We must remember that we are not talking about the consequences of climate change or air pollution in cities or other environmental problems caused by society as a whole.
What the Pool ensures is the risk that a company causes punctual damage to natural resources and has to answer for it. Of course, the large industrial installations that need to store dangerous substances for their activity generate great risks of this type, and in everyone’s memory, there are accidents that have involved hundreds of millions of euros and years of work but, from the perspective of the insured, a risk is great when, if it happens, the loss endangers the viability of the company.
Several claims, relatively modest among those that we have covered, would have meant the end of the insured company because it would not have been able to bear their cost or face the difficulties of repair.
Subscribers of these insurances, therefore, assume responsibility for damages that goes beyond civil liability. Somehow, with the figure of “environmental responsibility,” the risk is further delimited.
Exactly; environmental liability is an independent figure from civil liability; It is claimed by the Public Administration in defense of the common interest and not by the injured third party in defense of their own interest.
In addition, both can come together as a result of a single fact in which natural resources and third-party assets can be damaged at the same time; therefore, it is appropriate that they be insured in a complementary way.
The Pool has carried out more than 5,000 inspections and recommendations to industrial facilities as a prevention method, offering improvements in insurance conditions in exchange.
In the face of environmental risk, prevention is a key tool. Is this included in this type of insurance?
The Pool’s underwriting work has always been aimed at placing risk analysis and prevention as a priority. The Pool has carried out more than 5,000 inspections of industrial facilities and has made thousands of recommendations for improving prevention measures, offering proportional improvements in insurance conditions as compensation.
In addition, the Pool, twenty years ago, was the entity that promoted the preparation within AENOR of the only Spanish standard for environmental risk analysis, which has finally been adopted as a reference for environmental responsibility regulations.
Environmental damage does not always surface immediately; a leak in the ground, for example, can be detected years later. Does this condition the contracts of this type of insurance?
Environmental damage does not always surface immediately; a leak in the ground, for example, can be detected years later. Does this condition have any specificity in the contracts of this type of insurance?
That is a characteristic of the risk that we cover, which adds complexity; Legally, the insured may be subject to liability for up to thirty years after causing the environmental damage.
Insurance can assume these terms while they are being renewed annually and until the insured activity ceases; for those damages that surface long after the industry has been closed, the law provides for the creation of a fund, managed by the Insurance Compensation Consortium, whose operating bases are being developed precisely in these months.
By law, as of October 2018, a number of companies will be required to provide a financial guarantee for their environmental responsibilities. Many of them will opt for insurance.
We have not talked about compulsory environmental insurance; we understand that it will come into force shortly. Will this change the situation of environmental insurance in Spain?
Indeed, a few months ago, a Ministerial Order was published, according to which, at the end of next October, a number of companies will have to present a financial guarantee for their environmental responsibilities, and it is expected that most will opt for insurance. A year later, it will be up to another number of companies to do the same without forgetting that insurance has been mandatory for hazardous waste managers since the 1980s.
This is of interest for several reasons: firstly, because it helps spread concern about environmental risk and its coverage; the Environmental Damage Compensation Fund that we talked about earlier will also come into operation at that time.
But from the Pool, we always try to emphasize that what is relevant is not the mandatory nature of the guarantee but adequate risk coverage, whether it is mandatory or not. Most of the claims that the Pool has managed so far do not correspond to compulsory insurance contracts.