Treasurer Jim Chalmers' Monday order forcing six China-linked entities off the Northern Minerals share register has done more than tighten Canberra's grip on strategically vital rare earths. The move has put a niche specialty product: political risk insurance (PRI), at the heart of the West's contest with China over critical minerals.
The order targets Hong Kong Ying Tak, Real International Resources, Qogir Trading & Service Co, Chuanyou Cong, Vastness Investment Group and Zhongxiong Lin, requiring them to sell their combined stake – about 17.5% – within 14 days. The ASX-listed miner went into a trading pause and closed more than 8% lower. The intervention came as Canberra approved Gina Rinehart-backed Arafura Rare Earths as the first beneficiary of Australia's $1.2 billion critical minerals strategic reserve and as a high-level Taiwanese government delegation toured Sydney, Canberra and Perth scoping investment into the very sector Beijing has quietly tried to influence.
For brokers placing cover for inbound foreign capital into Australian resources, the question is suddenly urgent: Would a standard PRI policy actually respond to a Foreign Investment Review Board (FIRB)-driven forced divestment like Monday's order?
“Political risk insurance is a bespoke and highly specialised product,” said Malcolm Yeo (pictured), underwriter for trade credit and political risk at Markel International Singapore. “Policies are typically tailored to the specific investment, jurisdiction, and risk profile, with the scope of cover clearly defined and negotiated upfront between the insured and insurers.”
That emphasis on negotiation and specificity could matter more than it might initially appear because the Northern Minerals saga was building for years. The FIRB began investigating Chinese interests in the company in 2023, issued earlier divestment orders and has since alleged those orders were breached. The pressure has taken a visible toll. Long-time chairman Nick Curtis — who built Lynas into the largest rare earths producer outside China, and is also father of Firmus co-founder Oliver Curtis — stepped down in 2024, and the company has been forced to delay two annual general meetings since. The question now quietly circulating in the market is whether any affected investor sought political risk cover in the first place — and whether that cover was drafted tightly enough to respond to a regulatory forced sale.
The technical coverage question sits at an interesting edge of policy language. Government expropriation is well-established as an insured peril under standard political risk wordings. But forced divestment on national security grounds — driven not by a sovereign seizure of assets but by a foreign investment review mechanism — occupies less settled territory.
“Forced Divestiture coverage is a recognised peril under a political risk insurance policy and sometimes bundled under Expropriation cover,” said Yeo. “In that context, and without commenting on the specifics of this case, clients should work closely with insurers and brokers at placement to ensure the policy expressly captures the risks they are seeking to mitigate, including scenarios involving regulatory or national security driven divestment requirements.”
The word "expressly" is doing a lot of work here. It signals that forced divestiture does not automatically flow through a standard expropriation clause and needs to be negotiated in at placement. If FIRB risk wasn't specifically contemplated when the policy was bound — if no one at the table treated a regulator-driven forced sale as a live scenario — the coverage gap is real and the claim will not pay.
The day after The Treasurer’s order, Allianz released its latest Risk Barometer 2026. The global index placed political risk at number seven, the highest ranking ever recorded.
However, the concern from companies surveyed was focused on political violence rather than political decisions. Srdjan Todorovic, Global Head of Political Violence and Hostile Environment Solutions at Allianz Commercial, noted that “demand for political violence insurance continues to grow” and that clients “are broadening their coverage to better fit their risk footprint.” That broadening, in the critical minerals context, may not be happening fast enough.
And for Northern Minerals, if only it was as simple as securing PRI cover. Days earlier, Arafura Rare Earths became the first company to lock in support under the federal government’s new critical minerals strategic reserve, with Canberra committing close to $1.2 billion to its Nolans project near Alice Springs. A Taiwanese government delegation — dispatched by President Lai Ching-te’s administration to identify investment opportunities in a “non-Red supply chain” — was in Canberra on Monday, meeting with Australian officials and watching the FIRB enforcement unfold in real time. Japan signed a critical minerals cooperation agreement with Australia earlier this month. The US$230 million in Export-Import Bank funding earmarked for Northern Minerals via the Trump-Albanese critical minerals pact is contingent on the company being able to resolve exactly the kind of governance disorder the Chinese investors have created.
The insurance market, in short, is being asked to underwrite an industry that has become a front line in the contest between the world’s two largest economies. The capital flows are sovereign-backed and strategically motivated. The risks are novel, layered and, in some cases, untested at claims stage.
For brokers placing PRI on cross-border investment into Australian resources — whether for Taiwanese, Japanese, American or European capital now eyeing the sector — the Northern Minerals case has just provided the sharpest possible illustration of why the placement conversation needs to go further than it often does. Serious gaps may exist in these policies. Whether this gap exists in your policy is a different question entirely and depends on what was negotiated at the table. The answer could be quite consequential for this specialty line of insurance.
