Requirements to Operate Environmental Insurance Policies

On October 8, 2014, Resolution No. 999/2014 (the “Resolution”) issued by the Environment and Sustainable Development Secretariat (the “Environment Secretariat”), was published in the Official Gazette. The Resolution sets forth specific requirements to be fulfilled by insurance companies to sell insurance policies for environmental damages with a collective impact.
 
According to its Recitals, the Resolution was enacted to comply with court decisions (1) that ordered the Environment Secretariat and the Argentine Superintendence of Insurance to abstain from authorizing environmental insurance policies from insurance companies that had not obtained a prior environmental approval by the Environment Secretariat and had not proven technical ability to carry out remediation works. Both conditions were required by the Environment Secretariat before the enactment of Decree No. 1638/2012, which set forth a new environmental insurance regime, (2) but were not included in this new regime.
 
The Resolution establishes, in the first place, an obligation to obtain an environmental approval by the Environment Secretariat, with a technical report issued previously by the Hazardous Waste Directorate, and the Environmental Risks Evaluation Unit. To obtain such environmental approval, insurance companies must prove a certain technical ability to perform remediation works, based on the following requirements:
 
a) Submission of contracts signed with hazardous waste operators and transporters that are duly registered with the Registry set up by Law No. 24,051, and have a valid Annual Environmental Certificate and a valid Fiscal Certificate to enter into contracts;
 
b) Submission of agreements signed with at least two hazardous waste transporters, two ex situ operators and two in situ operators of such waste;
 
c) The operators and transporters proposed must have the following technology and technical and operative capacity: i) Ex-situ Treatment: D10 or R5 (3) (incineration on land or use as a fuel), 5,000 Tons Annually; D5 (specially engineered landfill), 30,000 Tons Annually; D2 (biological treatment), 30,000 Tons Annually); ii) In-situ Treatment: soil decontamination (e.g. vapor extraction, biopiles, bioventing); groundwater decontamination (e.g. dual-phase extraction, or pump and treatment system); iii) Transport: liquid bulk, 10 units of no less than 25 m3; dry bulk, 10 units of no less than 20 m3.
 
d) Operators proposed must be authorized to operate at least the waste streams and/or constituents for which they are specifically registered in accordance with Law No. 24,051;
 
e) Contracts between the insurance company and the hazardous waste operators and transporters must fulfill the following requirements: i) have a formal commitment from both parties to give notice to the Environment Secretariat of any amendment to the agreement; ii) include prohibition to the operator to outsource the services contracted; iii) permission by the operator to the insurance company of a minimum operation/intervention capacity consistent with the volume of the estimated/granted coverage by the insurance company; iv) signatures must be notarized.
 
The Environmental Risks Evaluating Unit must verify if the insurance plans for environmental damage fulfill the requirements set by environmental regulations, as well as the correlation between the risks covered and the proven remediation capacity. The Resolution makes clear that the end of a remediation contract without providing evidence of an extension or a new contract shall result in revocation of the environmental approval granted to the insurance company.
 
Once the environmental approval is granted, as well as the relevant authorization by the Argentine Superintendence of Insurance to sell insurance plans for environmental damage, the insurance companies must fulfill the following requirements:  
 
a) set an address for the purpose of notices of a contamination event;
 
b) submit a procedure to be followed by the insured when a contamination event take place;
 
c) have no pending claims from the Federal Tax Authority;
 
d) comply with the following indexes: i) verification of solvency, on account of the maximum amount of “MMES” (Minimum Amount of Sufficient Entity or Monto Mínimo de Entidad Suficiente), calculated according to regulations in force; ii) net worth equal or superior to 60,000 times the Correlation Factor (4) provided in Resolution No. 1398/2008 by the Environment Secretariat, as amended; iii) liquid assets and investments equal or superior to 120,000 times the Correlation Factor mentioned before. (5)
 
The Environment Secretariat, or the environmental authority in the jurisdiction, shall accept only policies from those insurance companies that have fulfilled the requirements previously mentioned. Also, the Environment Secretariat must keep in its web page a list of the insurance companies that have fulfilled the requirements set forth by the Resolution.
 
Finally, the insurance companies that are currently authorized to operate environmental insurance policies must fulfill the requirements set forth by the Resolution within a 90 business-day term.
 
 
 
 

1. This refers to preliminary measures issued in re: "N.G.N. Asesores de Seguros S.A. v Environment and Sustainable Development Secretariat et al, in re: declarative action (preliminary measure)", File No. 78/2012, Lower Federal Court No. 2 from the City of Formosa; and “Fundación Medio Ambiente v. Federal Government - Decree No. 1638/12 - SSN Resolution 37.160 in re: preliminary measure", File No. 56432/2012, Federal Court No. 9 in Administrative Matters.
2. In “Fundación Medio Ambiente  v. Federal Government - Decree No- 1638/12 - SSN Resolution 37.160 in re: preliminary measure" the court ordered the suspension of Decree No. 1638/2012, a decision that was later confirmed by the Court of Appeals.
3. It should refer to R1.
4. The Correlation Factor (Factor de Correlación) is currently of AR$ 800, according to Resolution No. 177/2013 issued by the Environment Secretariat. Therefore, net worth must be equal or superior to AR$ 48,000,000.
5. Liquid assets and investments must be equal or superior to AR$ 96,000,000.