The insurance industry’s climate policies and their impact on Australia’s fossil fuel-led export industries dominate the findings of a parliamentary inquiry into the prudential regulation of investment in the sector.

A number of the 13 recommendations made by the Joint Standing Committee on Trade and Investment Growth in its report released today, if taken up, could impact insurance providers who have reduced or withdrawn from providing cover to coal-related businesses.

The proposed measures with possible implications for the industry include the recommendation that the Australian Competition and Consumer Commission (ACCC) undertake a formal investigation into whether insurance firms, by “denying” coverage to lawful sectors such as the resources industry, may have breached the Competition and Consumer Act 2010.

The committee says pending the results of the ACCC probe, the Australian Government should consider options to ensure that viable, profitable and lawful businesses can access reasonably-priced finance and insurance services.

The committee also suggests that the Australian Government recognise that finance, banking and insurance services are “essential” services for businesses as well as work with the resources sector to create a self-funding insurance model that meets the needs of resource companies, contractors, suppliers and associated export infrastructure.

Committee Chairman George Christensen says that while a healthy financial system is underpinned by strong regulatory settings, it is important for law-abiding export sectors to have adequate access to funding and insurance, as they make significant contributions to Australia’s economy.

“The committee was concerned to learn that profitable and law-abiding companies in some of the country’s main export sectors – predominantly coal but also live animal exports – face the threat of losing access to essential services such as transactional banking, finance and appropriately priced insurance,” he said in the report’s foreword.

The report says finance and insurance is vital to the successful running of any businesses, particularly for the highly capital-intensive resources sector.

“The committee was concerned to hear so many reports from thermal coal companies, and other businesses that provide services to the resources sector, that they are facing increased difficulty in securing access to these services,” the report said.

“In particular, the committee was concerned to hear that businesses in the coal and coal-adjacent sectors considered that banks and insurers were not working with them on an individual basis and were instead applying a ‘blanket ban’ to their industry.”

The committee acknowledges that financial institutions must account for climate change-related financial risks in their decision making but it says this does not mean financial institutions need to “abandon” entire industries.

However Labor members of the committee and the Australian Greens have provided their dissenting views.

Labor says adoption of the recommendations may see Australia breach many of its obligations under international agreements relating to prudential regulation of the financial system.

The Australian Greens says it is “completely illogical” to suggest that an industry can deal with climate change – a systemic risk – through self-insurance.

“The whole concept of insurance is to pool risk,” Greens Senator Dorinda Cox said, in reference to the proposal urging the Government to look into a self-funding insurance model.

According to her, the recommendation is “seeding the idea that the Government should underwrite a mutual insurance scheme, at which point it’s no longer self-insurance, but state-subsidised capitalism”.

Click here for more from the report.