In addition to funding, coal projects need insurance. Coal mines, coal-fired power plants and associated facilities (such as railways and coal ports) are capital intensive and face serious physical, technical, legal, political and management risks; as well as the risk that other parties to a contract will not meet their obligations. Few such projects would advance without some kind of insurance cover, which is required to secure project financing and obtain authorisation. Insurers thus play a critical role in new coal projects.
Beyond the construction coverage, property coverage for projects that are already built are necessary and insurers are also crucial in enabling the operation of existing coal projects. Cover can be provided on a project basis, through stand-alone insurance (also called single-site), or to several projects together. In that case, existing coal projects might be insured along with other types of assets.
Not all insurers underwrite the risks related to the coal industry. The market is quite concentrated, with few major insurers able to have the expertise required to insure such gigantic risky projects.
New coal projects tend to require reinsurance coverage, when insurers transfer all or part of the risks they underwrite to reinsurers (such as Swiss Re, Munich Re, Hannover Re, and Scor), mainly through facultative reinsurance.