BEIJING--The municipal government of Kunming, capital of Yunnan province in southwest China, has issued an order requiring 340 businesses in its jurisdiction to purchase pollution liability insurance and has asked another 56 to buy the insurance voluntarily, according to a notice posted Sept. 30 on the city's environmental protection bureau website.

Similar ordinances on pollution liability insurance have been adopted in Chongqing municipality, the city of Ningbo in Zhejiang province, the city of Shenzhen in Guangdong province, and the city of Changsha in Hunan province.

Kunming's “Proposal on Promoting Environmental Pollution Liability Insurance” went into effect Oct. 1.

Kunming's environmental protection bureau has established a lead team to work with businesses to determine what kind of coverage they should purchase. Businesses operating within a zone of 2,920 square kilometers (1,127 square miles) around Dian Chi, a large lake on the southwest side of the municipality, are seen as the top priority. The entire municipality of Kunming covers 21,501 square kilometers (8,300 square miles).

Companies can purchase the coverage from any insurance company that offers pollution liability products, according to Peng Bo, an official with the Yunnan office of the China Insurance Regulatory Commission.

“The Kunming environmental protection authorities have the authority to force companies to purchase this insurance,” Peng said. “Pollution incidents by large industrial plants happen all the time and this harms the environment and endangers people's health and hurts social stability. It's hard for victims to get compensation and this causes a lot of social instability.”

Premiums will vary depending on the risks companies pose and their proximity to Dian Chi, according to Peng.

Businesses that transport, store or use hazardous chemicals; those that produce steel, chemicals, pharmaceuticals, paper, plastics, and machinery; and those engaged in mining, food processing, tobacco processing, and rubber processing within the zone near the lake are required to purchase the insurance.

Those operating such businesses within Kunming but outside the zone are urged to purchase the insurance voluntarily.

Peng said officials are exploring the possibility of extending similar policies to other cities in Yunnan province.

By Michael Standaert

Copyright 2009, The Bureau of National Affairs, Inc.