Home / Daily / Brokerage 'open letter' seeks coal activism rethink
7 April 2021
CRE Insurance Broking, which provides cover for the construction, resources and energy sectors, has highlighted an open letter calling for a rethink on the industry’s response to anti-coal activism as clients struggle to obtain cover.
The letter, written by CRE's Broking Director Adam Battista, says campaigns accusing insurers of failing to meet Environmental Social Governance (ESG) obligations have resulted in almost half the global reinsurance capacity available evaporating in two years as they look to pull out of the entire supply chain.
As a result, many mining and mining-related clients face commercially unacceptable insurance terms, conditions or premiums, or cannot find appropriate levels of cover.
“Some are already faced with the prospect of self-insuring entirely,” he says. “Those insurance companies left in the market that do provide cover can afford to become far more selective of the risks they take on.”
Mr Battista says steel and power supplies are critical for infrastructure and housing investments as governments seek to drive a recovery after the COVID-19 pandemic, but metallurgical and thermal coal producers risk breaching banking and funding covenants without appropriate insurance.
The letter says distinctions are often not made between metallurgical coal and power-generating thermal coal.
“Metallurgical coal, in its various forms has absolutely nothing to do with coal-fired power stations and everything to do with making steel; a cornerstone of our global civilisation with no viable substitute to meet demand,” it says.
“Without it, we cannot produce solar panels, battery operated cars, wind turbines or many of the other renewable technologies we are developing; not to mention everything else that steel is required for.”
The letter notes some countries supply low-quality coal that produces “immense amounts of environmentally damaging emissions”, while Australian thermal coal is of higher quality, mined subject to stringent environmental rules, and is a key source of low-cost energy for many countries.
“Moving to a balanced mix of renewables, gas, nuclear and coal should be the priority of all countries capable of pursuing that objective; however, the fact remains that Australian thermal coal is still one of the most efficient, and often most cost-effective way to provide countries with affordable and responsible energy,” the letter says.
Insure Our Future, a Greenpeace-backed group, said in a report in December that at least 23 insurers and reinsurers have ended or limited their cover for coal projects, up from 17 last year, representing 12.9% of the primary insurance market and 48.3% of the reinsurance market.
The group says the insurance industry has a unique power to drive the transition to a low-carbon economy by only insuring projects consistent with limiting global warming to 1.5 degrees Celsius.
“Insurers’ continuing shift away from fossil fuels is positive, but in the face of a worsening climate crisis it needs to accelerate,” co-ordinator of the campaign Peter Bosshard said on release of the annual scorecard.