A company in Hunan province was compensated 11,000 yuan ($1596) for an environmental liability policy it bought from Ping An Insurance.
This is China's first case of its kind, the Ministry of Environmental Protection (MEP) announced yesterday.
More than 120 villagers, whose vegetable fields were poisoned by leaked chlorid gas from Hunan Haohua Chemical Co Ltd, will share the compensation.
A senior official from the MEP said the environmental liability insurance, which is still a newborn thing in China, is regarded as one of the most effective market instruments and incentives to foster environmental protection and curb emissions.
The official added that MEP along with other government departments will further specify the status and scope of the insurance in relevant laws and regulations, in an effort to set up a long-term mechanism.
The official said that early this year, a pilot program of environmental liability insurance was carried out in Hunan, which is focusing on 18 enterprises in chemical, nonferrous metallurgical and steel industries.
In July, Hunan Haohua Chemical Co Ltd bought the insurance, valued at 40,800 yuan.
The MEP official said in this case, environmental liability insurance has effectively protected the rights of pollution victims and safeguarded stability of the local society as well as ensuring normal production of the enterprise.
Pan Yue, deputy minister of environmental protection, said previously in a bid to prevent pollution-related accidents, the insurance tool can help disperse management risks of enterprises.