Lloyd's warned over legal risks of underwriting a controversial coal mine project in Australia

Lloyd's warned over legal risks of underwriting a controversial coal mine project in Australia | Insurance Business

Lloyd

Lloyd’s of London has been warned by a climate finance lawyers’ group over legal and financial risks associated with Adani’s Carmichael coal mine, following its failure to rule out underwriting the controversial project.

“It is difficult to see how an insurer could justify underwriting the Carmichael coalmine,” wrote Stephanie Morton, ClientEarth climate finance lawyer, in a letter addressed to Lloyd’s CEO. “The project is crawling with financial, environmental, and reputational risk – and is strongly contested both locally and internationally. Banks are keeping well away from Carmichael and, logically, so should insurers.”

Morton criticised insurers’ supposedly contradictory stance on coal and climate change, saying their enabling of new coal projects is a “stark case of climate hypocrisy.”

“Many insurers acknowledge that climate change poses an existential threat to the sector,” Morton said. “Coal is the single largest contributor to climate change. The irony is that by enabling new coal projects, insurers are undermining their own viability. It is a stark case of climate hypocrisy. Insurers are legally required to have an effective risk-management system. How can you claim to have an effective risk-management system when you are sabotaging your own prospects?”

Last year, Lloyd’s announced that it would implement a coal-exclusion policy, which would detail red lines around investing in coal, but did not make the criteria publicly available.

ClientEarth earlier said the policy would not in any event apply to 97.5% of Lloyd’s capital, which remains exposed to coal-related risks, nor would it prevent Lloyd’s syndicates from continuing to underwrite coal projects.

“It may have taken a stance on coal investment, but if Lloyd’s is still underwriting coal, it’s still enabling it, and that comes with considerable risk,” Morton said.

ClientEarth called on Lloyd’s to publicly confirm the criteria and implementation of the specialist insurance market’s coal-exclusion policy, the steps it is taking to manage coal-related risks, and its position on the underwriting of the Carmichael coalmine by its syndicates.