Insurers are discriminating against the coal-mining sector and are undermining emission reduction efforts by limiting cover to innovative engineering and technology companies, a Parliamentary inquiry was told today.

Queensland Resources Council CEO Ian Macfarlane says insurers and banks are running ahead of the government and science when taking “matters into their own hands” in actions aimed at reducing emissions.

“It doesn’t make sense to us, though, that when you look across the emissions of industries in Australia, including the transport industry, that the resources industry is singled out for particular treatment by the insurance and banking sector,” he said.

Mr Macfarlane says Australian coal offers a cleaner alternative to competing overseas supplies, while firms in Mining, Engineering and Technology Services work across various fields, including the wind-energy industry, but are disadvantaged by their involvement with coal-mining.

“This is an unintended consequence of a policy that may have a particular target but has gone far beyond that,” he told the Joint Standing Committee on Trade and Investment Growth inquiry into the prudential regulation of investment in Australia’s export industries.

Whitehaven Coal CEO Paul Flynn said environmental, social and governance (ESG) considerations had taken some time to gain momentum in insurance but the sector now “looks like it may outshoot” the banks in its response.

“That is making insurance very difficult to the point that the industry is now exploring self-insurance opportunities, given that we understand this is not a matter of profitability,” he said. “In fact, insurance claims in our industry are very low, and relative to the premiums we pay.”

Resource Industry Network Chairman and GM at Field Engineers, David Hartigan said continuing problems would make it difficult for firms to operate.

“We would need to either have a change in the insurance requirements in our contracts or some other kind of financial instrument, like a mutual fund, or something other than buying insurance where our underwriters are currently getting it from,” he said.

Restrictions being imposed include ceilings on the amount of business sourced from thermal coal producers, while premiums have soared despite there being no change in actual risks, the committee heard.

Executives appearing before the committee were asked whether insurance should be mandated as an essential service, triggering obligations around providing it to lawful operations in the same way as power and water companies must meet certain requirements.

BMD CEO Scott Power said insurance was an essential part of delivering critical infrastructure, and projects are approved by governments.

“It seems totally unreasonable that the insurance industry would prevent those projects from being delivered,” he said.

Adani Australia CEO Lucas Dow told the committee that the company was the world’s largest solar power generator but coal “can’t simply be wished out of the energy mix” given demand by developing countries.

In Australia, national interest considerations should apply to banks, insurance companies and their regulators, he said.

Future hearings as part of the inquiry are expected to feature financial institutions, government agencies and other stakeholders.