In the financial year 2024 the premiums accrued for this coverage amounted to €0.31 million, while the benefits and expenses paid amounted to €0.01 million.

The Pool Español de Riesgos Medioambientales offers specific insurance solutions that address environmental liability through: 1) restoration of unforeseen damage caused to natural resources; 2) coverage of the insured's defence costs for guaranteed claims; 3) the possible provision of legal bonds; and 4) coverage of the cost of preventive measures, should an imminent risk of environmental damage arise. Additionally, within the same contract, civil liability coverage for damage to third parties due to pollution is offered.

Environmental Damage Compensation Fund

The Environmental Damage Compensation Fund (FCDM in its Spanish initials) was created by Law 26/2007, of 23 October, on Environmental Liability, as one of the instruments used to give substance to the polluter-pays principle, through the reparation of the damage caused, regardless of the administrative or criminal sanctions that may apply.

Specifically, Article 33 of the aforementioned Law foresees a new administrative regime for repairing environmental damage, by virtue of which operators who carry out certain economic or professional activities likely to cause damage to the environment must have a mandatory financial guarantee to enable them to meet the environmental liability inherent to the activity they intend to carry out, and whose creation must be notified to the competent authority on the subject matter.

Three types of financial guarantee are foreseen:

1. Taking out an insurance policy with an insurance company authorized to operate in Spain.
2. Obtaining a guarantee granted by a financial institution authorised to operate in Spain.
3. The creation of a technical reserve as an internal fund in the form of financial investments supported by the public sector

Among the modalities mentioned for the creation of the aforementioned guarantee, operators may underwrite an insurance policy, which must be supplemented in accordance with Article 33 of Law 26/2007, of 23 October, with a contribution to the Environmental Damage Compensation Fund (FCDM). The purpose of this contribution, as opposed to the other financial guarantee modalities, is to broaden coverage for environmental risks once the operator's activity ceases, extending to damage caused during the policy's validity period that are manifested or claimed at a later date, with a limit of 30 years from the end of the activity causing the damage. Thus, the ordinary policy from the insurer will cover the repair of environmental damage occurring during the 3 years following the operator's cessation of activity, while the Fund extends the policy coverage for a maximum of 27 more years from that date, at a rate of one year for each year the operator has been covered by an insurance policy.

The environmental liability is extended and, therefore, the FCDM coverage includes, without prejudice to the particularities that may be contemplated in the legislation of each Spanish Region, the following environmental damage:

1. Damage caused to wildlife species, flora and fauna, and land and aquatic habitats.
2. Damage caused to surface water or groundwater, in their ecological, chemical or quantitative state and damage to marine waters.
3. Damage produced to the seashore and estuaries.
4. Damage affecting the soil and subsoil.

Neither air damage nor personal injury or property damage are covered.

In any event, environmental liability is not enforceable for damage caused by: (i) armed conflict, hostility, or insurrection; (ii) exceptional natural events; and (iii) nuclear accidents.

In order to disseminate general knowledge of the characteristics of the FCDM, these can be summarized, among others, in the following points:

• In accordance with the aforementioned Article 33 of Law 26/2007, Consorcio de Compensación de Seguros acts as mere administrator and manager of the FCDM, the resources of which are independent both financially and accountingly from the rest of the activities that it carries out. Thus, Consorcio will not have to bear any payments related to environmental damage charged to the equity of any of its other activities.

• The FCDM is fed by the contributions made by the operators defined in the Law whose activities are likely to cause environmental damage. These contributions will be transferred by the insurance companies together with the commercial premiums applied to their policyholders for the coverage of the mandatory financial guarantee. In any event, the beneficiaries and recipients of the resources of the FCDM are exclusively the operators.

The contribution to the FCDM was set in the Resolution of the Directorate General of Insurance and Pension Funds of 31 October 2018, at a rate of 8% of the amount of the commercial premium corresponding to the mandatory financial guarantee for environmental liability.

• The activity of the FCDM is not insurance in the strict sense, as the liability of the Fund is limited to the amount constituted in the Fund.

• The mandatory financial guarantee of the FCDM is limited to 20 million euros per event (environmental damage), with the possibility of setting a deductible by the Ministry of Ecological Transition; an option that has not been considered to date.

• Unlike other types of guarantee (guarantee and technical reserve), taking out an insurance policy entails extending, through the FCDM, the coverage for repairing environmental damage beyond the damage that becomes apparent or is claimed in the first three years following the interruption of the coverage under the ordinary policy due to the termination of the activity.

The validity of the Fund is defined in Order APM/1040/2017, of 23 October, which set 31 October 2018, as the starting date of activity for priority 1 operators, and one year later for priority 2 operators. Likewise, Order TEC/1023/2019, of 10 October, established 16 October 2021, as the starting date of activity for priority 3 operators, with the exception of intensive poultry or pig farming activities, which started on 16 October 2022.

The ranking of priorities is set out in Order ARM/1783/2011 of 22 June 2011.

CLAUSE PROPOSAL TO BE INCLUDED IN INSURANCE POLICIES THAT INVOLVE COVER BY THE ENVIRONMENTAL DAMAGE COMPENSATION FUND

You can expand the information on the financial guarantee for Environmental Liability in the web page of the Ministry for Ecological Transition and Demographic Challenge.