Coal call: Adani wants government backing for mutual insurance scheme
Adani Australia has stepped up its push for a government-backed mutual scheme to address the insurance crisis facing the coal sector, raising the pressure on politicians as the country prepares to go to the polls in slightly more than two weeks’ time.
The business gave a preview of what CEO and Country Head Lucas Dow was expected to say as part of his presentation this afternoon at the Sydney Mining Club.
“It’s time for our political leaders of all colours to step in and act where the market has failed,” Mr Dow said.
“Banks and insurers denying service to businesses directly and indirectly involved in the coal and the gas sectors is an unacceptable risk to an industry that helps fund the way of life many of us take for granted.”
He says “the prosperity and sustainability of coal mining communities is being put at risk by the actions of banks and insurers”.
Mr Dow says a mutual insurance fund, as proposed by the Joint Standing Committee on Trade and Investment Growth in its report last December, should be taken up by Canberra.
The report, which looked into insurance and other problems facing the resources sector, recommended the Federal Government work with the industry to create a self-funding insurance model that meets the needs of resource companies, contractors, suppliers and associated export infrastructure.
Mr Dow says the industry has done its homework and has developed a mutual insurance fund model that would be self-sustaining within five years.
However, it will need government support to get the scheme started.
“The challenge is getting the fund off the ground initially, and to do that we’d need the government to provide an initial drawdown facility to ensure fund solvency in the early years of the fund,” Mr Dow said.
“Importantly this would not be a handout and would only take the form of a contingent liability in the event of potential extreme payout events. Should the drawdown facility need to be accessed, the government would be repaid at commercial rates.”
Mr Dow says “an unequivocal commitment” from political parties for a “self-sustaining” coal industry mutual scheme is the answer to the sector’s struggle to secure cover from insurers, which in recent years have moved away from doing business related to fossil fuels.
Adani’s Carmichael coal mine has been particularly affected, with climate activists carrying out a global campaign pressuring the insurance industry against underwriting the Queensland project.
The business said in its submission to the Joint Standing Committee’s inquiry that the Australian industry’s “boycotting” of the local thermal coal sector is “misconceived” and will lead to “consequential impact” on the economy.
A spokesman for the Insurance Council of Australia says the proposed mutual as outlined by Adani is a matter for government to decide upon, pointing out the concept is not new to the resources sector.
“Significant parts of the resources sector have been successfully self-insuring for many years, and there are many insurers still providing cover for this sector,” the spokesman said.
“Whether the Government supports a resources mutual is a policy matter for them.”
The spokesman says in order for a mutual to be sustainable and viable over the long term, they “must be carefully designed and established to ensure adequate resources exist to cover the claims of members”.
ICA says central banks and financial regulators globally now widely acknowledge that climate change is a source of financial stability risk.
“Our industry is aligned with the regulatory guidelines on managing the financial risks of climate and we recognise that our regulators are keeping pace with the global standards,” the spokesman said.
