All Australian jurisdictions have their own laws regarding the provision of security for mine rehabilitation works. For example, New South Wales has had in place for some time, the ability for this security to be provided in the form of insurance sureties. In 2019, Queensland introduced a new regime enabling the use of insurance sureties as a form of surety.

An insurance surety is an undertaking provided by an insurance company on behalf of the bonded party (mine operator) to a beneficiary (the state) to pay the face value of the surety on presentation. It works just like a bank guarantee.

While both jurisdictions previously required that insurance surety providers be approved by the Australian Prudential Regulation Authority (APRA), recently, Queensland has approved an overseas insurer in recognition of both the change in the Australian insurance surety market, as well as the financial ability of the overseas insurer. This is a significant win for Queensland miners. In due course, the expectation is that New South Wales will follow Queensland's common-sense approach.

We have facilitated a range of commercial opportunities to secure the performance of mining rehabilitation in these jurisdictions via insurance sureties.


Under the Environmental Protection Act 1994 (Qld), the Queensland Government obtains financial assurance from resource companies as a means of securing the performance of their mine rehabilitation obligations, so that the costs of rehabilitation are not met by taxpayers.

In Queensland, mining projects are required to provide:

  • an annual cash payment into a pooled scheme fund; or
  • a surety, similar to the existing financial assurance payment regime, but with additional options for the form of the surety (such as an insurance surety).

Practically, a 'Scheme Manager' is appointed to assess and allocate, a company to a risk category, which will in turn determine where the company sits in the financial assurance regime.

Financial assurance for environmental rehabilitation may only take the form of:

  • a bank guarantee;
  • an insurance bond;
  • payment of a cash amount;
  • an escrow deposit; and
  • any other specified means.

Both States have traditionally required that institutions providing surety must be registered with APRA.

Both Queensland and New South Wales have also implemented requirements for progressive rehabilitation. In Queensland, mine operators must provide a progressive rehabilitation plan under the Mineral and Energy Resources (Financial Provisioning) Act 2018 (Qld), whereas in New South Wales, progressive rehabilitation efforts are required by law, as introduced by the Mining Amended (Standard Conditions of Mining Leases - Rehabilitation) Regulation 2021 (NSW).

The commercial problem

First, Australian banks and insurers are becoming less inclined to be associated with mining activities because they require significant financial commitments. As a result, mine owners are faced with a shortage of willing product providers and significant costs of obtaining surety.

Second, few Australian insurers have the appetite to provide insurance sureties, particularly to coal mining companies, with some significant insurers having withdrawn completely from providing insurance sureties to coal mines, as they continue to face more pressure to retract their involvement with coal mining operations.

Finally, even in the rare circumstances that a bank or insurer has not already withdrawn from the coal business, most of these banks and insurers do not have the necessary APRA approval to provide surety.

The solution

Notwithstanding the challenges in the local Australian insurance and financial sectors, some appetite exists from offshore insurers to provide insurance sureties to Australian miners.

While this form of security is available in both Queensland and New South Wales under the respective mining regimes, there has been a lack of willingness from Australian insurers to provide such sureties.

In the past 12 months, we have worked closely with the Queensland and New South Wales Government treasuries to enable approval of overseas insurers.

During our engagement, both treasuries recognised the failure of the Australian insurance market with respect to insurance sureties and the particular challenges for coal miners. There has been outstanding positive contribution and engagement by both treasuries, although recently Queensland took the lead, by authorising an overseas insurer to provide insurance sureties to Queensland mining companies.

While discussions are ongoing with the New South Wales Treasury, we are hopeful they will follow Queensland's lead.

How do you get an insurance surety?

An insurer will look at the same characteristics as a bank in terms of financial strength and resilience, a well-developed core business with a good performance track record, strong management, corporate governance and a generally sound financial position along with other business and sector metrics. In the absence of some of these characteristics, insurers will also take into consideration the financial position of the shareholders or parent companies.

When deciding whether it will issue an insurance surety an insurer, will take into account the following:

three years of audited financial statements and latest management accounts;

  • cash flow statements;
  • the relevant mine plan;
  • the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves;
  • company and project profile;
  • organisational structure (entity and personnel); and
  • any offtake arrangements and domestic supply contracts.

ESG and sustainability reports and initiatives are also beneficial.

Finally, the insurer will request regular reporting of the mine operator's financial statements, including regular cash flow forecast updates and updates on progressive rehabilitation.

McCullough Robertson's Insurance and Corporate Risk team, together with its affiliated insurance business Allegiant IRS, continue to assist mining companies with exploring potential insurance surety options.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.