Insurance Jottings

Insurers Distance Themselves from Disputed Australia Coal Project as Backlash Grows

Global insurance companies linked to Adani’s Carmichael coal mine in Australia are distancing themselves from the controversial development, as pressure mounts on financial institutions to cut their ties to the fossil fuel industry.

 

A growing global consensus has seen financial institutions from Japan to the US and Europe shun investments in coal projects. Adani’s search for partners in the project, which would open up an untouched basin, has been frustrated as activists increasingly pressure banks, insurers and contractors to abandon the dirtiest fossil fuel.

 

The pushback comes after the Sydney Morning Herald reported on the 11th June that Liberty International Underwriters, HDI Global SE and AXA SA’s XL Australia, as well as reinsurer Aspen Re, charged Adani for policies covering work at Carmichael since November.

 

The report was based on invoices obtained from an employee at the broker, Marsh & McLennan.

 

In response to Bloomberg queries, LIU’s parent company Liberty Mutual Insurance Company, Hannover-based HDI, and France’s AXA all said they had no active policies in place for Carmichael and had ruled out insuring the project in the future. Liberty and HDI both confirmed they had insured some early site works dating back to 2015.

 

Liberty said its policy expired last October, but it was contractually obligated to a 24-month maintenance period for any defects following the conclusion of the insurance period.

 

Aspen Group would not comment on individual policies, but said it was reviewing its underwriting appetite for fossil fuels.

 

Adani won approval last year to proceed with the thermal coal mine in Queensland’s Galilee Basin following a decade-long struggle with regulators and climate action groups.

 

Australia’s top insurance companies including QBE Insurance Group Ltd and Suncorp Group Ltd have steered clear of the Carmichael project, while last year German company Siemens AG l drew a backlash from protesters after signing a contract for signalling work on a rail link to the mine.

 

An employee at Marsh & McLennan, which Adani hired in 2015 to secure cover for the Carmichael mine, leaked the invoices after being frustrated by its lack of transparency on matters relating to the project, the Sydney Morning Herald reported. Marsh & McLennan declined to comment on the report.

Adani said in an emailed statement that “details on insurance providers for the Carmichael Project are commercial in confidence, however we have the requisite insurance requirements in place.”

 

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AXA Plans to Sell Coal Assets, Citing Concerns About Climate Change

 

McLarens acquires LWI from Crawford

Loss adjuster McLarens has acquired Crawford-backed energy specialist Lloyd Warwick International (LWI) for an undisclosed sum.

 

Unprecedented Arctic Diesel Spill Angers Putin and Could Force Green Reform in Russia

The mishandling of the biggest Arctic oil spill ever infuriated Russian President Vladimir Putin and could give a boost to the country’s environmental regulation.

 

MMC Norilsk Nickel PJSC, Russia’s biggest miner, didn’t make a public statement until two days after the accident, on the 29th May which leaked over 20,000 tons (150,000 barrels) of diesel into a fragile Arctic river system.

 

By then, images of the catastrophe had gone viral on social media and soon the governor of the region made a public report to a visibly irritated Mr Putin. The president publicly scolded Vladimir Potanin, Nornickel’s biggest shareholder and the country’s richest man, for not upgrading the tank before it leaked.

 

As the extent of the spill became clearer, investigators said the 10th June that they’d detained several employees of the unit responsible for the tank, a move Nornickel called excessive.

 

The company has said melting permafrost and soil subsidence damaged the tank. If true, that means infrastructure across the country’s vast north may be at risk as the ground warms.

 

Nornickel has long been criticised for ignoring environmental issues. A small investment in the tank might have prevented the spill, which now threatens extinction for many fish, birds and mammals unique to Siberia’s Taimyr Peninsula, a senior official said.

 

Mr Putin was very angry over the spill, according to the person, who asked not to be identified in order to speak candidly.

 

Blacklisted

The accident could become a catalyst for the president to push through long-stalled environmental regulations targeting Russia’s aging energy infrastructure, the person said.

 

Kremlin spokesman Dmitry Peskov didn’t respond to a request for comment.

 

This isn’t the first time the company’s pollution problem has wounded Russia’s environmental reputation. Its main assets are located in Norilsk, one of the country’s dirtiest cities.

 

Norway’s sovereign wealth fund, the world’s largest, has blacklisted Nornickel since 2009 for the damage it has done in the Taimyr Peninsula.

There are two main versions of what caused the accident.

 

Nornickel and Russia’s Prosecutor General blame the melting permafrost for causing damage to the tank. Russia’s Investigative Committee said the 35-year-old tank was commissioned without proper permits in 2018, the year Nornickel says it was renovated.

 

The disagreements extend to the damage caused by the spill. Fuel from the accident has been found in Lake Pyasino that feeds into the Kara Sea, putting local wildlife at risk, Interfax reported the 9th June, citing the regional governor Alexander Uss.

 

A Nornickel investor presentation the same day said the spill was contained before reaching the lake and there was no risk to the Kara Sea.

 

10,000 Spills

What is clear is the size of the spill is unprecedented. Greenpeace compared it to the 1989 Exxon Valdez accident in Alaska.

 

Nornickel estimates it will cost US$150 million to clean up.

 

Russia, the world’s biggest energy exporter, has at least 10,000 oil spills annually, according to Vladimir Chuprov, the head of Greenpeace Russia’s energy program. The accidents are concentrated in the country’s sprawling oil pipeline system, at least half of which is past its useful life, Mr Chuprov said.

 

The situation is growing more critical as permafrost melts due to climate change. With more than half of Russia’s land permanently frozen, vast swaths of the country has infrastructure at risk as the ground thaws.

 

Stalled Bill

Yet stricter regulation to prevent and liquidate oil spills has been stalled in parliament since 2018, when a draft bill passed its first reading. The law would require companies with fuel storage or pipelines to maintain detailed plans to contain spills and create financial reserves to fix any damage.

 

After the accident, Mr Putin ordered checks of similar tanks around Russia and urged the quick adaptation of new legislation. This week, Prime Minister Mikhail Mishustin revived talk of the 2018 bill.

 

The draft is too vague to make an impact and needs a clear mechanism to create provisions, according to Darya Kozlova, head of oil and gas regulation at Moscow-based Vygon Consulting. A better approach would be to rely on insurance policies and online monitoring, she said.

 

“The major problem is Russian companies are not motivated to change the situation and to invest into preventing accidents,” Greenpeace’s Mr Chuprov said, who advocates limiting pipelines and infrastructure in the Arctic to 20 years of service.

 

No-deal Brexit would magnify coronavirus impact on UK economy

A no-deal Brexit would “significantly” damage the UK’s recovery from a recession following the coronavirus pandemic, Moody’s Investors Service warned on the 10th June.