As the world struggles with climate change impacts, the fossil fuel industry continues to provide profits for many Australian businesses – including insurance brokers. However, the rise of environmental, social, and governance (ESG) requirements, including climate impact reporting, are a major challenge for this industry.
Insurance Business raised this issue with Scott Cole (pictured above), CEO of Centrewest Insurance Brokers (Centrewest), a West Australian firm headquartered in Perth – he took the role in December. His observations of the mining industry and its insurance challenges are based on his experiences before he moved into his new position.
IB asked Cole, given that ESG is a serious risk management concern for mining industry stakeholders, how are local brokers adjusting to this challenge?
“I think it’s relevant and so therefore it’s a challenge that’s going to have to be faced,” he said. “When there’s any kind of emerging risk you’ve got to be able to, first and foremost, meet your existing client needs before you even start trying to push your value adds to new clients.”
He added that he’s not a specialist in the oil and gas mining space and that sector requires very specific knowledge. Cole realized that, he said, when he attended a Diggers & Dealers Mining Forum.
On its website, the Forum describes itself as “Australia’s leading mining forum” and takes place annually in the WA mining town of Kalgoorlie. Last year’s Forum, according to organisers, involved more than 2,500 delegates from the mining, broking, banking and investment sectors, from around the world.
“Oil and gas is an industry where, for many of the people involved, that’s all they do and there’s a reason why they’ve spent their whole careers dedicated to it,” said Cole. “It requires a very specific knowledge base and skill set and also your business needs to be set up in a way where you’ve got the ability to do things that others won’t.”
He said attending this mining conference was “a bit of a mind-blowing experience” when he realised “just how involved everybody that’s within the mining space is.”
The expertise among the delegates impressed Cole.
“I think from a general advisor point of view,” he said, “when I went as purely an observer to the conference, I found that it was really hard to even engage in a lot of conversations at any level when it was mining specific because everybody that I was rubbing shoulders with just knew so much about it.”
Cole said this was his “big takeaway.”
“We had made a commitment back then that that wasn’t part of our strategy to push into mining – and I think that’s the right move,” he said.
As a generalist broker, however, he could understand why a broker could be “seduced by all the big dollar signs because there are these booms going on.”
“That’s great,” said Cole. “But if you want to do it, you’ve got to make sure that you are going to be relevant, you’re going to want to make sure that you’re not exposing yourself by not having the right people, the right advice and the right structure.”
He said as a generalist broker he could tell he didn’t have that expertise.
“Those specific areas I knew to steer clear of, or to upskill pretty quickly, if I was going to want to do it,” said Cole.
The mining and petroleum industry is a dominant force in WA’s economy employing about 150,000 people. The value of WA’s exports alone account for nearly half of Australia’s total, much of that value is driven by natural resources like liquefied natural gas.
In an interview with IB last year, Nick Cook, CEO of the global brokerage BMS Group also answered questions about the ESG challenges facing brokers and their customers.
“I do not support in any way, shape, or form, any market - whether it’s here in Australia, in London, or anywhere else - that just turns their back on the energy and the mining sector, rather than working with them,” said Cook. “Our job is to support our clients’ transition and that’s what we’re doing.”
Are you an insurance broker in the mining sector? What are your insurance and risk management challenges? Please tell us below.
