Legal Regulation of Environmental Insurance

General Provisions

The legal regulation of environmental insurance is aimed at protecting the property interests of individuals and legal entities in the event of occurrence of environmental risks. This institution is formed on the basis of general provisions on insurance, established in Chapter 48 of the Civil Code of the Russian Federation and the Law "On Organization of Insurance Activities in the Russian Federation," and is supplemented by norms of environmental legislation. Environmental insurance covers both liability for causing damage to the environment and the property interests of those affected.

In scientific literature, two main forms of environmental insurance are distinguished: mandatory and voluntary. Mandatory insurance is established by law and includes both governmental and non-governmental protection mechanisms. Voluntary insurance is carried out at the initiative of economic entities based on a concluded contract and is aimed at insuring civil liability for damage to the environment resulting from unintentional ecological incidents.

The parties to an environmental insurance contract are the insurer and the insured. The insurer is a legal entity with the appropriate license, while the insured is an entity using natural resources or the owner of a source of increased environmental hazard. Mandatory insurance provides that the owner of a hazardous facility is obliged at their own expense to insure liability for damage to the environment and third parties throughout the entire period of operation of the facility.

Special attention is given to liability insurance on objects of increased environmental risk, including industrial and nuclear facilities. Legislation establishes the requirement for financial assurance of the liability limit of the operating organization, which may include a state guarantee, own funds or an insurance policy. This allows for real protection against potential losses and damage to the environment in case of accidents.

The legal regulation of voluntary environmental insurance is based on the Typical Regulation, which defines the insurance risk as the probability of third parties making property claims for damage to the environment. The object of insurance is the risk of civil liability for soil contamination, water bodies or the atmosphere. The occurrence of an insured event entails the insurer's obligation to pay the insurance compensation to the policyholder, beneficiary or affected party, which helps reduce the economic consequences of environmental incidents.

General provisions on insurance are provided in Chapter 48 of the Civil Code of the Russian Federation, as well as by the Law of the Russian Federation "On Organization of Insurance Activities in the Russian Federation"¹. The current legislation does not contain a definition of the term "environmental insurance". However, this term is proposed in scientific literature. According to M.M. Brinchuk, environmental insurance refers to relations aimed at protecting the property interests of individuals and organizations in case of environmental risks through special insurance funds². According to B.V. Erofeev, environmental insurance is considered as the insurance of liability of potential sources of danger for the environment in case of damage caused by them to physical and legal entities, as well as to the environment itself as a result of an insured event, which in our case is unintentional harm to the environment³.

The purpose of environmental insurance is to protect the property interests of legal and physical persons in case of environmental risks (paragraph 1 of Article 18 of the Federal Law "On Environmental Protection").

The parties to an environmental insurance contract are the insurer and the insured. As noted by A.L. Bazhaykin, the insurer is a legal entity endowed with exclusive subjectivity, holding a permit (license) to conduct insurance of the relevant type. The insured is a subject of special use of natural resources, as well as an owner of a source of increased environmental hazard imperatively established by laws⁴.

Environmental insurance can be carried out in the form of mandatory environmental insurance (which, in turn, is divided into state and non-state) and in the form of voluntary environmental insurance.

According to N.I. Khludeyeva, compulsory environmental insurance is carried out in cases explicitly established by law, while voluntary insurance is initiated by subjects of economic and other activities affecting the environment, based on a contract concluded between the insurer and the insurance company⁵.

The current legislation provides for a provision according to which the owner of a hazardous facility is obliged at their own expense to insure property interests related to the obligation to compensate damage caused to victims, by concluding an obligatory insurance contract with an insurer throughout the entire period of operation of the hazardous facility⁶. An organization operating a hazardous production facility is obliged to insure liability for damage caused to the life, health or property of other persons and the environment in the event of an accident at a hazardous production facility (Article 15 of the Federal Law "On Industrial Safety of Hazardous Production Facilities"). To make a decision on granting permission for the commissioning of a hazardous facility, a document confirming the conclusion of an insurance contract for civil liability of the owner of the hazardous facility for damage caused as a result of an accident at such a facility is required (paragraph 10 of part 3 of Article 55 of the Urban Planning Code of the Russian Federation⁷).

According to paragraph 1 of Article 56 of the Federal Law "On the Use of Atomic Energy"⁸ the operating organization is obliged to have financial assurance for the limit of liability for damages and harm caused by radiation exposure, established by Russian Federation legislation. The financial assurance of the operating organization in the event of compensation for damages and harm caused by radiation exposure consists of a state guarantee or another guarantee, availability of own financial resources, and an insurance policy (contract).

Voluntary environmental insurance is carried out in accordance with the Typical Regulation on the Procedure for Voluntary Environmental Insurance in the Russian Federation⁹. According to the Typical Regulation, an insurance company (insurer) provides insurance protection for the civil (property) liability of policyholders for damage caused to third parties as a result of sudden, unintentional and unexpected pollution of the surrounding natural environment within the territory of the Russian Federation. According to the above regulation, the object of environmental insurance is considered to be the risk of civil liability expressed in the submission of property claims by physical or legal entities in accordance with the norms of civil legislation on compensation for damage caused to land areas, water environment or air basin within the area of application of a specific insurance contract¹⁰.

According to Article 9 of the Law of the Russian Federation "On Organization of Insurance Activities in the Russian Federation", an insurance risk is considered a potential event for which insurance is conducted. An insurance incident, on the other hand, is an event that has occurred and is provided for by the insurance contract or law, the occurrence of which gives rise to the insurer's obligation to make an insurance payment to the insured party, the beneficiary, or any other third parties.