Stringent new legislation relating to the management and insurance of plants dealing in hazardous materials in the Russian Federation is set to have far-reaching implications for companies operating in the country, including international businesses. The legislation, Federal Law No. 225-FZ, came into force in Russia on 1 January, 2012 and penalties for violation will be applied from 1 April, 2012.

According to Marsh, a global leader in insurance broking and risk management, many organisations have yet to consider the full implications of the new legislation. As a result, these businesses are potentially facing higher insurance costs – up to a ten-fold increase – and sizeable fines if they are found in breach of the new law.

Introduced following the Sayano-Shushenskaya plant disaster in 2009 in which dozens of workers were killed, the law stipulates that owners of plants dealing in hazardous materials have liability insurance covering the bodily injury of workers, inhabitants and third party property damage.

Applied individually to each facility rather than the entire organisation, the mandatory level of insurance depends on the exposure created and is measured in terms of the maximum possible number of victims. This insurance can only be provided by insurers that are members of the Russian Federation’s National Union of Liability Insurers.

Jeroen Spanbroek, Liability Consulting Leader for Europe, the Middle East and Africa in Marsh Risk Consulting, explained: “The Sayano-Shushenskaya incident prompted much debate around the safety and accountability of plants operating within Russia, both by domestic organisations and foreign firms. The new law seeks to act as a deterrent for future negligence and ensure victims receive appropriate compensation.

“In order to avoid costly fines, companies must ensure that they have properly assessed their level of risk and have adequate insurance in place. Failure to do so may face result in them being subject to sizeable fines.”