Argentina recently implemented environmental directives requiring companies that conduct potentially high risk operations to obtain insurance that will cover any environmental damage that they may cause.

The directives also establish the sum of remediation costs to ensure adequate response to pollution conditions.

"Companies that do not comply with the directives may be unable to renew their operating permits," said Alejandro Guerrero, managing director, Marsh Environmental Practice.

Affected companies include manufacturers, mining companies, agricultural companies, chemical, some treatment storage and disposal companies, and any company involved in the production or handling of dangerous substances.

"The insurance requirements involve obtaining coverage that will indemnify them for third-party claims as a result of physical and/or material damage caused by their activities," noted Chris Smy, Global Environmental Practice Leader.

This insurance can be structured to narrowly follow the regulations and only provide those coverages that the regulations mandate. It can also be structured to include coverages on a broad basis, except for the exclusions specificied in the policies.

Surety Insurance

Surety policies are the only alternative form of insurance authorized by the insured superintendency (SSN) and in compliance with Section 22 of the General Environmental Law.  The policy warrants payment by the policyholder to the Environmental Compensation Fund of the substitute compensation established by the courts.

Prudencia was the first insurer to offer this coverage.  Subsequently, three other companies, Escudo, Nacion, and Testimonio, have begun to offer this coverage.

Environmental Insurance

At this time, no environmental insurance policies comply with the provisions of the regulations.  However, Chartis and Sancor Seguros have products that have been approved by the Insurance Superintendency (SSN). ACE and Chartis are also developing new wording that is expected to comply with the regulations.

Self Insurance

These types of programs will likely be established for entities that are found eligible to participate if they meet a certain set of requirements.