We know that, with each passing year, there are more and more obligations on the part of the Administration in various economic activities. From data protection to working hours registers... and we have been noticing this for some years now, also in the environmental area.
Since the emergence of the Law 26/2007 new initiatives are being taken to protect our nature. Today we are talking about the obligation that, as of 16 October 2022, will be introduced in the poultry farms and on pig farms, and the formulas to solve it.
Where is environmental risk regulated and what requirements does it impose?
At the time, we already wrote an article where we explained the type of environmental liability which applies in Spain. The Law 26/2007 on Environmental Liability is intended to regulate the liability of the operators of:
- prevent,
- avoid and
- remedy environmental damage
This is in accordance with Art. 45 of the Constitution and the “polluter pays” principle.
In turn, Order ARM/1783/2011 establishes the order of priority and timetable from which the preparation of the ARMA and, where appropriate, the constitution of the financial guarantee will be required. The purpose of this financial guarantee is to respond to possible damage caused to the environment.
Livestock production (poultry farming, pig farming, etc.) is regulated as priority level 3. This priority level indicates that, by October 2022, they should have developed the Environmental Risk Analysis (popularly known as ARMA). This is an analysis carried out by specialised environmental consultancies that will measure: the natural environment, the activity, the means used for economic activity and, ultimately, the potential economic damage that can be caused to soil, water or biodiversity.
Based on this analysis, there are 2 options:
- If the potential damage exceeds €300,000 in repairs (or €2M if you have an environmental management system), you must have a financial guarantee to cover the damage.
- If it does not, it will have to make a “responsible declaration” to the Autonomous Community, without the financial guarantee being essential.
What does financial security look like and why is insurance the best option?
There are 3 formulas, in the case of having to have a financial guarantee, in order to be able to carry it out:
- A bank guarantee
- A technical reserve (i.e. having funds available on the balance sheet in a fund created expressly for this purpose to respond to environmental damage).
- Environmental insurance
Of these three options, the only one to externalise risk (which, if something happens, prevents the company from assuming all the costs involved in causing environmental damage), is to take out insurance. This option represents a fixed annual cost that is deductible for corporate tax purposes, and allows us to know what costs we assume from year to year.
What coverage is included in environmental insurance?
The guarantees included in the insurance depend, as always, on where they are taken out. There are several insurers that work in the form of a “no-claims" policy.“insurance pool”. They join forces to generate synergies between them, and offer a joint underwriting solution.
This pool has somewhat limited guarantees, with sub-limits for certain coverages such as legal defence and some exclusions such as underground tanks and others, which must be well controlled to avoid surprises.
Our recommendation is to opt for specialised companies such as Berkley, Zurich, among others, which have their own specialist teams, and will provide you with cover such as:
- Stoppage of activity
- Crisis management and emergency expenditure
- High sum insured limits
If you are in any of these situations and you want to study your environmental insurance, PIB Group Iberia can help you to study it and compare different options. Remember that although the ARMA does not specify that you must have a compulsory financial guarantee, it does not mean that it is not advisable to have insurance, as the risk exists anyway.
Do you want us to help you protect your company's environmental liability and potential pollution? Trust the specialised team at PIB Group Iberia. As an insurance brokerage, we can offer you different insurance options and find together the one that best suits your needs.
