The Spanish Environmental Risks Pool: environmental insurance accessible to all

It’s been a long time, but many of us still remember with shock events like the sinking of the oil tanker Prestige (2002) or the rupture of the Aznalcóllar dam (1998), which caused significant environmental damage. Although all precautions are taken, human activity – and especially economic activity – can cause events of this type.

The insurance industry’s concern about these events has always been present. In 1994, some companies in the insurance industry joined forces and resources to form the Spanish Environmental Risks Pool (PERM). Since then, this Economic Interest Group – made up of insurers, reinsurers and the Insurance Compensation Consortium – has provided coverage for damage to the natural environment.

In Spain, environmental insurance is governed by Law 26/2007, which incorporates Directive 2004/35/EC into our legal system, later developed by Royal Decree 2090/2008.

The regulation governs the environmental responsibility of economic operators, following the principles of 'prevention of damage to the natural environment' and 'the polluter pays.' Specifically, it urges companies to implement measures to prevent ecological damage, as well as to remedy the damage and cover the associated costs when they are responsible for it.

Certain activities (such as waste management or disposal, water treatment, and those related to hazardous materials or extractive industries, among others) must have a mandatory guarantee to ensure compliance. Among the various tools available, there is the option to take out environmental responsibility insurance.

For three decades, the Spanish Environmental Risks Pool has been at the forefront of underwriting the risk that a company may cause isolated damage to natural resources and, consequently, be held responsible for it. In its role, it designs and manages specific insurance for its members to meet the responsibilities arising from the law and its regulations, and covers:

• Compensation for liability required by the authorities
• Defense costs for the insured party and legal bonds
• The cost of measures to prevent environmental damage

Additionally, within the same contract, they offer third-party liability coverage for pollution, aimed at compensating third parties that have been harmed.

Another of the PERM's priorities is prevention, conducting inspections of industrial facilities and providing numerous recommendations for improving preventive measures.  

According to the study Environmental Insurance in Spainprepared by Estamos Seguros, between 2010 and 2021, the PERM handled 300 environmental incidents.

Spills of substances, soil and aquifer pollution, the emission of smoke or toxic gases, etc. were some of the most common occurrences. Although half of environmental incidents caused damage of less than €1,000, the average cost of repairing these incidents was around €30,000, with some events exceeding €300,000.

It is also important to note that environmental damage does not always manifest immediately. For example, soil seepage may not be detected until years later, adding complexity to the insurance process. In fact, legally, the insured party can be held liable for up to thirty years after the damage has occurred.

Finally, it should be noted that these claims usually remain open for several years, as their resolution requires a lengthy process of repair and a monitoring period to ensure the measures have been effective.

In short, the insurance is attentive to the phenomenon of environmental responsibility and demonstrates its commitment by offering companies, institutions, and individuals the appropriate solutions to provide financial protection against environmental damage.

Today, as it has been for the past 30 years, the PERM – of which MAPFRE and MAPFRE RE are members – continues to fulfill its mission of enhancing the capacity to manage environmental insurance risks in Spain, by pooling the resources of different companies and creating products to address these threats, while also keeping them up to date and evolving in line with customer needs.

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