Chubb is underwriting a new insurance policy that protects banks lending to property developers involved in redeveloping former industrial land.

The Lenders' Environmental Insurance Programme is an extension of Chubb's fidelity and liability cover currently provided to UK financial companies.

The cover is designed to protect banks in the case of developers defaulting on business loans – possibly caused by the discovery that the land is contaminated.

Cover is not site specific enabling it to be spread over a developers' whole portfolio of properties.

Mark Appleton, Chubb casualty practice leader, said the insurer has worked with specialist environmental risk consultants EIM to develop the cover.

"The relationship between EIM and Chubb means that a lender can purchase the product from a team which understands the environmental situation and the lender's business."

Robin Bryant, a director of EIM, added: "We believe a site specific scheme would be unworkable for banks whose need is for blanket coverage on a portfolio basis for existing and new business alike."

The launch of Chubb's policy coincides with the granting of new powers to local councils to identify and clean-up polluted land.