Adani still vulnerable on insurance for its Carmichael mine and railway
Like the stampede that saw almost 40 major banks turn their backs on Adani’s Carmichael coal mine and rail project (eventually forcing Adani to pledge it will “self-fund”), major insurance companies are now also refusing to insure this climate-wrecking project.
All major projects require underwriting insurance, for public liability, plant and equipment damage and workers compensation, among other things. But 14 global insurers, including some major players in the resources and energy sectors, have now said publicly that Adani won’t be buying insurance from them.
Several organisations around the world are now working hard on encouraging more insurers to join this list. And while Adani has claimed in the media that it has “all its insurance requirements in place”, there are several reasons to be skeptical about it being a done deal.
First, there’s Adani’s long history of making false claims about the long-delayed Carmichael project in order to give the impression of momentum.
For example, Adani falsely claimed it was starting construction in 2013, 2014, 2015 and 2017. It made a “final investment decision” on the $16billion project in June 2017, only to shrink the project to around $3b in November 2018.
A second reason to be skeptical is that the claim about having all of its “insurance requirements in place” presumably refers only to Adani’s existing activities. While some preparatory works have begun at the Carmichael mine site, large-scale construction and mining has not. Since the detailed design of the railway line is yet to be completed, it’s unlikely an underwriter for its construction is already in place. In fact, it’s likely Adani still needs to seek coverage for all future activities it’s not currently insured for.
The final reason related to the nature of insurance contracts, which tend to be short-term – usually 12 months or, on occasion, several years. Underwriting in effect needs to be continually sought and renewed. French insurer AXA, for example, has told Market Forces that it has an insurance contract to “partly cover the [Adani] railway asset” until 2020 – and once this contract expires, AXA does not plan to renew it.
So, while Adani would like everyone to think it has its insurance sorted, the reality may be a very different matter. Restricting Adani’s access to insurance therefore remains an important avenue in delaying and possibly stopping the disastrous Carmichael project from going ahead.
With worsening storms, floods, bushfires, droughts and heatwaves being fuelled by the climate crisis, insurance companies around the world are being hit hard – the last thing they should be doing is providing cover for a massive new coal mine that will fuel the fire.
Pablo Brait, Market Forces