Green finance can effectively enhance the incentives of enterprises for green innovation, thus promoting high-quality economic development. However, compared with financial products such as green credit and green bonds, green insurance still has a broad space for development in China’s green financial system. Therefore, green insurance, as an important branch of green finance, has attracted great attention from the Chinese government in recent years. Is the implementation of relevant policies conducive to corporate green innovation? Few studies have fully demonstrated this.

Based on the quasi-natural experiment of environmental pollution liability insurance system (EPLI), this paper uses the multi-time DID model to test the impact of green insurance on corporate green innovation. The results show that compared with non-heavy-polluting enterprises, EPLI significantly promotes the green innovation of heavy-polluting enterprises, which is mainly reflected in state-owned enterprises, small-scale enterprises, areas with lower environmental protection law enforcement, and a mandatory regulation period. Mechanism testing shows that based on the important role of insurance tools in environmental risk assessment, environmental risk prevention, and pollution accident claim settlement, EPLI can promote corporate green innovation through four channels: improving the quality of corporate environmental information disclosure, strengthening the awareness of corporate green environmental protection, reducing corporate agency costs, and enhancing corporate risk-taking level. Further analysis shows that EPLI and green credit policy complement each other, and they synergistically promote corporate green innovation, but the improvement of green innovation quality by EPLI is still insufficient.

This paper has the following contributions: (1) From the long-term perspective, it enriches the research on the relationship between EPLI and the green economic transformation of enterprises. (2) From the perspective of insurance, it clarifies the mechanism of EPLI affecting corporate green innovation. (3) It identifies the synergistic effect between EPLI and green credit policy, and deepens the research on the path of enabling enterprise green transformation by the green insurance policy.