After major insurers and reinsurers have refused to cover any new coal projects, global coal companies are considering setting up a mutual insurance company to cover their mining projects and other operations. They propose to pool their funds to set up the proposed mutual insurer.
Over 30 major global insurers have pledged no longer to insure any new coal project and also to withdraw their cover from the existing coal projects. According to insurance industry sources around 40 insurers have decided not to insure Adani Group’s Carmichael mine in Australia.
These decisions by the global insurance industry have had a major impact on the coal industry across the world and coal mining projects in Australia, US and several other countries are feeling the heat.
Insurance insureourfuture.co in a report on the proposal of coal industry to set up a mutual insurance company said, “Lack of insurance has now “gotten to be the No. 1 issue that our members face”, a coal lobbyist in North Dakota commented in January. And BMD, a company which is building the railway line for the Carmichael coal mine, reported in May 2021 that it tried to negotiate liability insurance for its project with 33 carriers but failed to secure any cover.
A recent report in the Sydney Morning Herald said mining representatives are engaged in discussions with Picnic Labs, a company which sets up insurance mutuals, to create a self-insurance scheme. A pool of A$20-50m ($15-38m) would allow coal companies to ‘control their own destiny’. Any plan by the coal industry to self-insure its risks will, however, face a number of serious challenges.
The report on insureourfuture.co said coal industry is not known for its deep pockets and any self-insurance scheme which is based on its meagre capital base will require a lot of reinsurance to absorb the massive risks of operating coal mines and power plants.
Any reinsurance covers, however, would be difficult as Swiss Re, Munich Re, Hannover Re, SCOR, Lloyd’s and many other reinsurance companies have also pledged that they will no longer reinsure new coal projects and phase out existing operations.
Australian activist group Market Forces campaigner Pablo Brait in a post on social media platform LinkedIn said, “All reinsurers, insurance brokers and governments that claim to take the climate crisis seriously must reject any collaboration with this dangerous scheme. Any association with some of the world’s biggest climate polluters would obviously be a reputational disaster.
“Instead of wasting precious time creating an insurance mutual, coal companies should be planning for a rapid managing-down of their coal mining activities, in line with the goals of the Paris Agreement. How bad do the fires, floods and storms need to get before the Minerals Council of Australia and its members like Adani and Whitehaven put human life before their short-term profits?” said Mr Brait.
The latest IPCC report also clearly outlines that coal needs to be urgently phased out in order to limit catastrophic global warming as much as possible. Mr Brait said, “If this proposed Australian coal mining insurance fund is established, it will only serve to delay the transition to clean energy and deepen the climate crisis.” A