Shortcomings of Environmental Assurance in Mining and the use of Insurance as a Complement

Rehabilitation of mined out areas is often enforced by environmental bonding. It is usually assumed that this process provides financial assurance that rehabilitation will be carried out as agreed at the permitting stage. Shortcomings of the current practice in environmental bonding for mining are reviewed. Of particular importance for the public, for governments and for the environment is the absence of protection against cost overruns and companies defaulting before the bond amount is entirely paid. Elements of solution are identified through the emergence of environmental insurance as a complement to bonding for cost overruns and defaults. A cover of environmental catastrophes could also be added, hence reducing the risk for the public and the environment. We examine the merit of creating a captive insurance company under the responsibility of the mining industry. The use of insurance techniques would incorporate a genuine risk management dimension to the financing of rehabilitation.