Adani beware: coal is on the road to becoming completely uninsurable



Insurers have to protect themselves against foreseeable risks. For insurers of fossil fuel projects, those risks are growing.
Shutterstock

John Quiggin, The University of Queensland

The announcement by Suncorp that it will no longer insure new thermal coal projects, along with a similar announcement by QBE Insurance a few months earlier, brings Australia into line with Europe where most major insurers have broken with coal.

US firms have been a little slower to move, but Chubb announced a divestment policy in July, and Liberty has confirmed it will not insure Australia’s Adani project.

Other big firms such as America’s AIG are coming under increasing pressure.

Even more than divestment of coal shares by banks and managed funds, the withdrawal of insurance has the potential to make coal mining and coal-fired power generation businesses unsustainable.

As the chairman and founder of Adani Group, Gautam Adani, has shown in Queensland’s Galilee Basin, a sufficiently rich developer can use its own resources to finance a coal mine that banks won’t touch.




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But without insurance, mines can’t operate.

(Adani claims to have insurers for the Carmichael project, but has declined to reveal their names.)

Why are insurers abandoning coal?

By the nature of their business, insurers cannot afford to indulge the denialist fantasies still popular in some sectors of industry. Damage caused by climate disasters is one of their biggest expenses, and insurers are fully aware that that damage is set to rise over time.

Even so, a sufficiently hard-headed company might choose to work both sides of the street – continuing to do business with fossil fuel companies, while also writing more expensive insurance against climate damage.

The bigger problem insurers face is the risk of litigation holding fossil fuel companies responsible for climate-related damage. For the moment, this is a potential rather than an immediate risk.

As US insurer AIG, yet to announce a divestment policy, has observed:

Based on our monitoring, while the overall volume of litigation activity has increased, past litigation seems to have largely been unsuccessful on numerous grounds including difficulties in determining and attributing fault and liability to a particular company, and the judiciary’s deference to the political branches of government on questions relating to climate change.

Recent development suggest these difficulties will be overcome.

It’s becoming easier to finger climate culprits…

Until recently, the most immediate problem facing potential litigants has been demonstrating that an event was the result of climate change as opposed to something else, such as random fluctuations in climatic conditions.

Scientific progress on this “extreme event attribution problem” has been rapid.

It is now possible to say with confidence that climate change is causing an increase in both the frequency and intensity of extreme weather and weather-related events such as extreme heatwaves, drought, heavy rains, tropical storms and bushfires.

The Bulletin of the American Meteorological Society has highlighted three extremes in 2016 that would not have occurred if not for the added influence of climate change:

  • a persistent area of unusually warm water that lingered off the Alaskan coast, causing reduced marine productivity and other ecological disruptions

  • the extreme heatwave that happened in Asia, killing hundreds and destroying crops

  • the overall global atmospheric heat record set that year.

…and to allocate liability

The second line of defence against climate litigation that has held so far is the difficulty of imputing damage to the companies that burn fossil fuels.

While it is true that all weather events have multiple causes, in many circumstances climate change caused by the burning of fossil fuels has been a necessary condition for those events to take place.

Courts routinely use arguments about necessary conditions to determine liability.

For example, a spark from a power line might cause a bushfire on a hot, dry, windy day, but would be harmless on a wet cold day. That can be enough to establish liability on the part of the company that operates the power line.

These issues are playing out in California, where devastating fires in 2017 caused damage estimated at US$30 billion and drove the biggest of the power companies, PG&E, into bankruptcy.

As a result there has been pressure to loosen liability laws, leaving the cost of future disasters to be borne by Californians in general, and their insurers.

Lawyers will be looking for someone to sue.

Adani is a convenient target

The question facing potential litigants is whether any single company contributes enough to climate change to make it meaningfully liable for particular disaster.

Adani’s Carmichael mine provides a convenient example.

Adani says the 10 million tonnes of coal it plans to mine will produce only 240,000 tonnes of carbon dioxide, but this is semantic trickery. The firm is referring only to so-called “scope 2” emissions associated with the mining process itself.

When the coal is burned it might produce an extra 30 million tonnes of carbon dioxide, amounting to about 0.05% of global emissions.

A 0.1% share of the damage associated with the California fires is US$15 million, enough to be worth suing for. Other similarly sized mines will face similar potential liabilities.

Once a precedent is established, any company in the business of producing or burning fossil fuels on a large scale can expect to be named in a regular stream of suits seeking substantial damages.

When governments are successfully sued…

The remaining line of defence for companies responsible for emissions is the history of courts in attributing climate change to decisions by governments rather than corporations.

In the Netherlands, a citizen action group called Urgenda has won a case against the Dutch government arguing it has breached its legal duty of care by not taking appropriate steps to significantly restrain greenhouse gas emissions and prevent damage from climate change.

The government is appealing, but it has lost every legal round so far. Sooner or later, this kind of litigation will be successful. Then, governments will look for another party that can be sued instead of them.

…they’ll look for someone else to blame

Insurance companies are an easy target with deep pockets. Despite its hopeful talk quoted above, AIG would find it very difficult to avoid paying up if Californian courts found the firms it insured liable for their contributions to a climate-related wildfires or floods.

This is not a message coal-friendly governments in the US or Australia want to hear.

But the decision of Suncorp to dump coal, just a couple of months after the re-election of the Morrison government, makes it clear that businesses with a time horizon measured in decades cannot afford wishful thinking. They need to protect themselves against what they can see coming.




Read more:
Explaining Adani: why would a billionaire persist with a mine that will probably lose money?


The Conversation


John Quiggin, Professor, School of Economics, The University of Queensland

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Going travelling? Don’t forget insurance (and to read the fine print)



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If you don’t have a motorbike license back home, your insurance might not cover you if you have an accident abroad.
Eirik Skarstein

David Beirman, University of Technology Sydney

Over the past year, Australians took almost 11 million international trips. We’re among the world’s leading international travellers on a per-capita basis.

Australians took more than 3.5 million trips to Asia in the past year. Indonesia (especially Bali), Thailand, Malaysia, Philippines, Vietnam, Singapore and Cambodia are the most popular destinations in the region. This is especially the case for young Australian travellers, who are attracted by low prices, the range of activities, and the easy-going lifestyle.

However, all international travel involves risks. You may have an accident or illness that lands you in hospital; you may even need to be repatriated to Australia. So it’s important to take out appropriate insurance for your trip.




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No, the consulate won’t pay

In the late 1970s, travel insurance companies struggled to convince 50% of Australian international travellers to purchase travel insurance. Now around 90% purchase health insurance.

Travellers aged under 30 are much more likely to travel without insurance cover than any other age group. Around 82% of international travellers aged 18-29 have insurance.

Young men are more likely to refuse travel insurance than women. This is concerning because young men are more likely to engage in risky behaviour, such as riding motorbikes or risky drinking, and the peer pressure to take a dare remains strong. Some men, particularly those travelling in groups, imagine themselves to be bulletproof.

Young Australians are less likely to travel with insurance.
Goh Rhy Yan

Some Australians still naively believe their government will bail them out if they become sick or are injured and aren’t covered by travel insurance.

But while Australian diplomatic legations can provide details of local doctors and hospitals in an emergency, they won’t pay for medical or psychiatric services or medications.

Check the fine print

Some insurance claims run to hundreds of thousands of dollars, especially if the person requires extensive treatment in an intensive care unit.

Most reputable travel insurance companies offer substantial medical coverage.
They generally provide unlimited cover for any illness or accident experienced overseas. This includes covering the costs of treatment, hospitalisation, medication, surgery and, if necessary, evacuation or repatriation.

Some cheaper policies may require travellers to pay an excess on their premium for unlimited medical coverage.

Travellers are covered for tropical diseases such as Malaria, Zika and other conditions which can be contracted while travelling.

Many adventurous travellers engage in high risk activities but these are not necessarily covered by travel insurance policies. Travellers who plan to ski, bungee jump, mountaineer, abseil, trek or engage in other risky activities, should choose your insurance cover carefully.

This Choice guide is a good place to start. It explains traps and exclusions that may apply to insurance cover for loss, injury or illness.




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Few travel insurance companies will cover policy-holders for treatment related to pre-existing medical conditions, including pregnancy or heart attacks at any age.

Travellers who need medical treatment from injuries incurred while intoxicated by drugs or alcohol may also have their claims rejected.

Australians who are injured in a motorbike accident abroad may find their claims rejected if they don’t have a motorbike licence in Australia and especially if they aren’t wearing a helmet (even if it isn’t required in the country they’re riding in).

If you’re over 75, you might need to shop around for the right policy.
Yichuan Zhan

Insurance companies’ definition of a senior can range from age 50 to over 80, but in many cases premiums will rise from age 75.

Some travel insurance companies have more stringent fitness requirements and require more medical documentation for senior travellers, especially those who have previously had a heart attack.

Reading the fine print of an insurance policy or obtaining expert advice is one of the least glamorous aspects of travel planning but it’s an essential part of minimising risk for your trip.




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Bali tourism and the Mt Agung volcano: quick dollars or long term reputation


The Conversation


David Beirman, Senior Lecturer, Tourism, University of Technology Sydney

This article is republished from The Conversation under a Creative Commons license. Read the original article.