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Insurance giants say no to Adani Mining's Carmichael project in Australia

Claims by activist group untrue, says Adani Mining

Subhomoy Bhattacharjee  |  New Delhi 

Adani protest
An October 2017 photo of surf lifesavers participating in a protest against Adani's proposed coal mine project in Australia, at Sydney's Bondi Beach | Photo: Reuters

Some global have decided against providing cover to Adani Mining’s Carmichael project in Australia.

According to a report in Asia Insurance Post, an insurance journal, the five reinsurers are AXA, SCOR, FM Global, QBE and Suncorp. The Carmichael project has been facing financing challenges for a long time. But it got a fresh lease of life recently when Adani Enterprises issued a press release on November 29, stating it would self-finance the project.

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“Adani Mining's Carmichael mine and rail project will be 100 per cent financed through the Adani Group's resources, CEO Lucas Dow announced in Central Queensland today,” the release noted. Due to pressure from environmental groups, banks in most geographies have decided not to finance the project.

“The campaign is being run in Australia by the activist group Market Forces, which pressures in an attempt to get them to change their legal and legitimate business models,” has noted in its response to an email from Business Standard. “Market Forces’ claims that Carmichael will cause ‘catastrophic climate change’, the premise for the Unfriend Coal campaign, are simply untrue,” it adds.

Business Standard independently contacted the insurance firms mentioned in the report. While none of them responded, scaling down on providing insurance cover to fossil fuels, especially coal, is part of an emerging global trend. However, the refusal by some of the leading insurance firms does not mean that the options for have been closed. The global market, for insurance, while growing steadily, has traditionally depended on extractive industries for a substantial part of their premium.

ALSO READ: Adani urges Australian state to speed up Carmichael coal mine approval

According to US non-governmental group Consumer Watchdog, the more proactive insurers on environmental issues have been from Europe. It has claimed that six of them — Allianz, AXA, Munich Re, SCOR, Swiss Re and Zurich — have begun to scale down their exposure to coal projects.

Adani Mining has said its choice of “insurance arrangements, like most businesses, are commercial-in-confidence. Like any other Australian organisation, Adani Australia ensures we have the insurance necessary to cover our various business activities”.

Responding to the developments, S Mohan, principal officer and managing director of Paavana Insurance Brokers, headquartered in Chennai, said: “The environmental concerns could begin to impact the reinsurance market for mining projects located in India too.”

ALSO READ: Adani's Australian mine plans face further delay on environmental concerns

Incidentally the coal mines of state-run Coal India Ltd are also not insured. But their associate facilities are covered. Another state-run firm, Neyveli Lignite, has for years taken out a comprehensive cover for its power plants and mines. But there is no break-up available to distinguish the separate risks from the two operations.

Because of the financial headwinds, the Carmichael coal mine is now expected to produce around 10 million tonnes a year, scaling up to 27.5 million tonnes in the first stage of the project. A Reuters report had said Adani’s original plan was to produce 40 million tonnes of coal every year.

First Published: Tue, December 25 2018. 21:42 IST