The State Environmental Protection Administration (SEPA) is currently considering the development of an environmental pollution liability insurance system along with the China Insurance Regulatory Commission (CIRC), The Beijing News reported on Thursday.

The announcement comes not long after SEPA jointly implemented a "green credit" program with the People's Bank of China and Banking Regulatory Commission, whereby businesses who fail to adhere to environmental regulations would be challenged in their applications for bank loans.

During this year's two sessions of the National People's Congress (NPC) and the Chinese People's Political Consultative Conference (CPPCC), some CPPCC member proposed to set up legal coverage for the damage and losses caused by environmental pollution.

SEPA and CIRC conducted a pilot research report in Jilin and Zhejiang provinces during the first half of this year, where they solicited opinions from enterprises on petrochemicals, dangerous goods transport, hazardous waste disposal, and insurance companies. The findings were recently completed and distributed to local environmental protection bureaus as a reference for further work.

Many enterprises expressed their support for the liability insurance system, said the report. Representatives from PetroChina and China Petroleum and Chemical Corporation suggested it was not prudent to bring large chemical companies into a compulsory insurance system at present. Unlike small companies, which lack financial resources, they are able afford compensation without assistance.

On the other hand, some enterprises felt that the injured party would have a right to demand compensation directly from the insurance company if compulsory insurance were implemented. The insurance company could then pay part of the indemnity in advance for accident management and compensation to the third party.

The insurance companies hope to improve related laws with administrative supports and solve problems on assistance of reinsurance. A new law should first define the scope of coverage then design insurance products. At the present research stage, they have suggested paying indemnities for direct damages, like a contamination disposal fee, but not to collateral damage, like recovery of an ecological environment.

The research team has appealed to start pilot programs as soon as possible in the trades of dangerous goods production, transportation, storage, and petrochemicals, particularly in the areas of Taihu Lake, Huaihe River, Yellow River, Songhua River, and the lower reaches of the Yangtze River.

(China.org.cn by Li Shen August 24, 2007)