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Big two reinsurers refuse to back Australian coal mutual

Munich Re and Swiss Re have ruled out supporting a mutual fund for the Australian coal industry that is struggling to find cover in the open market over climate change concerns. The move could be yet a further nail in the coffin for the controversial Adani mine.

A coal industry mutual fund has been touted as a potential solution to the insurance challenges faced by the Australian coal industry.

An Australian government inquiry is currently examining the insurance challenges faced by the sector. A submission to the inquiry flagged the mutual coal fund proposal.

The Australian National Party is now demanding its government establish a A$250bn fund to lend public money to mining companies to finance and insure coal projects that the private sector is unwilling to touch. The proposed loan facility could support the creation of a coal industry mutual fund, according to the Insure our Future campaign group.

Concerned that the Australian mining and coal sector is trying to set up a mutual, Insure Our Future wrote to Munich Re, Swiss Re and Lloyd’s to see if they would rule out supporting the initiative.

Swiss Re and Munich Re effectively ruled out their participation, saying it would fall foul of their climate and coal policies.

“As stated in our annual report… Swiss Re does not provide (re)insurance to businesses with more than 30% exposure to thermal coal utilities, mining or supporting infrastructure. This applies to all lines of business and also to the (re)insurance of mutuals,” said Swiss Re.

Munich Re said: “We can confirm that we are fully committed to our coal phase-out policy and our business units will act accordingly when approached by this coal mutual.”

Lloyd’s meanwhile suggested that the proposals outlined in a Reuters article “would go against” its climate change and coal policies due to come into force next year. So it didn’t rule out participation but the chances of it backing the scheme look thin.

A mutual fund big enough to cover Australian coalminers and coal businesses would require reinsurance. Insure our Future pointed out that if reinsurers don’t back the scheme, it is unlikely to succeed unless there is a “significant injection” of public funds.

“As global pressure grows on the Morrison government to strengthen Australia’s climate commitments ahead of COP26, handing out public money to cover the insurance costs of coal companies is unlikely to be favourable with voters and Australia’s international allies,” the campaign group said.

The commitments from reinsurers not to support the proposed mutual fund come as an insurance policy for the controversial Adani Carmichael coalmine expired last week. Lloyd’s syndicate Apollo previously committed to not renewing a construction policy for the mine.

Insure out Future said there are now fresh doubts about where Adani is obtaining insurance cover from, and whether it is pushing for the establishment of a coal mutual to solve its continued insurance problems.

Pablo Brait, campaigner with not-for-profit research and advocacy organisation Market Forces, said: “Swiss Re and Munich Re’s commitments should serve as a warning to other reinsurance companies that may be approached to support the Australian coal industry mutual fund. Any association with a mutual fund underwriting the Australian coal industry would be a reputational disaster. All reinsurance companies should be publicly distancing themselves from this scheme, which would extend a lifeline to Australian coalmining and accelerate the devastating impacts of climate change.”

Lindsay Keenan, European coordinator of the Insure Our Future network, criticised Lloyd’s’ approach to the Adani mine, but said even it seems to be backing away from the coal mutual idea.

“Despite 32 of its syndicates publicly ruling out involvement in the Adani Carmichael coal mine, Lloyd’s has so far refused to make a market-wide commitment and so allows other Lloyd’s syndicates to continue to insure Adani. However, even Lloyd’s has clearly stated that the coal mutual proposal would go against its coal policies due to come into force next year,” Keenan said.

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