Some coal producers are having to set aside tens of millions of dollars to cover their own risks as they are cut adrift by insurers, making it more difficult and costly to do business amid a surge in demand for the fossil fuel. Dozens of insurers have announced restrictions on their cover for the coal industry, particularly for new projects, in response to pressure from shareholders, governments and environmental groups who want to limit coal's contribution to global warming. This follows similar moves by banks to restrict their coal financing activities.Some coal producers are having to set aside tens of millions of dollars to cover their own risks as they are cut adrift by insurers, making it more difficult and costly to do business amid a surge in demand for the fossil fuel. Dozens of insurers have announced restrictions on their cover for the coal industry, particularly for new projects, in response to pressure from shareholders, governments and environmental groups who want to limit coal's contribution to global warming. This follows similar moves by banks to restrict their coal financing activities.
LONDON – Some coal producers are having to set aside tens of millions of dollars to cover their own risks as they are cut adrift by insurers, making it more difficult and costly to do business amid a surge in demand for the fossil fuel.
Some miners, including South Africa's Seriti Resources and Thungela Resources, are already setting aside capital to self-insure and only buying insurance to protect against larger and less frequent losses. But the need to earmark funds for self-insurance ties up money on the balance sheets of coal companies and could leave them vulnerable to large costs when something goes wrong, industry analysts say.
Whitehaven Coal, Australia's top independent coal miner, has seen its insurance costs roughly double over the last two years, a person familiar with the company who asked not to be identified because the information is financially sensitive, told Reuters.Seriti has a combination of self-insurance to cover damage to some assets, while retaining some cover from the insurance industry such as flood damage or underground fire damage, a spokesperson said.
Thungela told Reuters it intends to become fully self-insured in future, without specifying the timeframe. Chubb, which says it does not insure new risks for miners generating more than 30% of their revenue from coal, declined to comment. China's PICC and Russia's SOGAZ did not respond to a request for comment.
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