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Sustainability assured through environmental insurance

Environmental insurance not only repairs, restores or replaces damaged natural resources, but also proposes avoidance and prevention measures

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14.Mar.2022

Lately, environmental insurance has been booming, not only because there is greater awareness of the issue, but also because there has been a significant tightening of regulations and compliance criteria to ensure increased environmental protection.
 
However, there are still many erroneous beliefs hanging over this issue. For example, there is a tendency to think that it is only large industries that could cause enough damage to nature to require this type of insurance. However, the truth is that any professional or natural or legal person who carries out an economic activity is subject to this responsibility. That is why, in order to clarify the concepts involved, the first thing we need to know is what exactly we mean when we talk about “environmental damage”:

What is environmental damage?

This is any significant damage caused to the soil, water, coastline, protected spaces or wildlife habitats. In other words, this damage does not only refer to the pollution that an industry can produce, which is the way we typically think about it, but it can also be related to a fire, to changes in the water table, to poorly managed waste, odors, stains, and so on.

Obviously, some activities involve a higher risk than others of producing this type of damage. That is why Law 26/2007 on Environmental Responsibility indicates in which cases certain business activities are obliged to take out insurance to cover this possible damage: waste management companies; landfills; water treatment plants; businesses that transport hazardous materials; and extractive industries, as well as many others.

Repair, restore, replace, avoid and prevent

Environmental insurance not only repairs, restores or replaces damaged natural resources, but also proposes avoidance and prevention measures. In other words, once the damage to the environment has occurred, the insurance company takes all the steps necessary to prevent further damage. In addition, insurance companies advise their clients on how to prevent any type of environmental damage from occurring in the first place.

When companies are unable to meet the solvency requirements of the competent authorities, they could lose the administrative authorization to continue their business activity. They may even have to cover any damage with their present and future personal assets. Having an insurance of this type provides additional protection to allow them to keep operating while respecting the environment.

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