ISSUE 121 | AUG/SEPT 2024
28 SRROC Audits 34 Waste to Energy 38 Consultants’ registry
What should a CDS rebate be worth? By: Mike Ritchie and Conor Mackenzie, MRA Consulting Group
Bush fires can have a huge impact on waste industry premiums. Image: Toa55/shutterstock.com.
Appetite waning for insurers in waste industry By Inside Waste
PP: 100024538
ISSN 1837-5618
NATURAL DISASTERS such as floods and bushfires, as well as those caused by human action (or inaction) such as battery fires in rubbish trucks and MRFs, are on the increase. In the case of the former, these have mainly been due to an array of weather patterns blamed on climate change. In the case of the latter there has been a proliferation of lithium-ion batteries designed to drive innovative technologies that have appeared over the past decade. What that has meant for the resource recovery sector in increased risks. This is turn leads to either an increase in insurance premiums, or insurers unwilling to issue policies due to risk factors being too high. This has a knock-on effect of investors unwilling to put monies into new facilities, which in turn affects a council or other third-party’s ability to collect and recycle resources and dispose of waste. At a recent symposium held by
the Victorian Waste Management Association, Steve Richards, a Senior Account Manager for insurance advisory firm RSM Group, outlined some of the challenges facing the industry when it comes to insurance. He was joined by Alan Brett, Head of Commercial Underwriting at Australasia Underwriting (AU). Richards said that RSM has tried multiple approaches to present the waste industry in different ways to make it more appealing to insurers, but the “vast majority of the insurance market doesn’t really have an appetite” for the sector. “[That lack of appetite]is coming from the reinsurers,” he said. “It’s not something that we think will change anytime soon, however we are seeing some capacity increase. Property valuations continue to be absolutely critical and those are really based on under insurance where you get penalised for a loss. Then there is the increased cost of construction that’s come through from restrictions and pressures on the
supply chain from COVID, which we’re still recovering from.” He said that risk management is the absolute gold standard. If a company is managing a risk, and it’s willing to demonstrate how it can be managed, then it needs to convey that to a specialist broker. Another impact on premiums, according to Richards, is the El Nino weather pattern. It usually means warmer and drier conditions with minimal rainfall, which can lead to an increased risk of bushfires around the country. And if bushfires do start having an impact, then premiums will increase. There is also the impact of social license. For example, if you put in a plan to get a resource recovery plant up and running, what are the risks of it being rejected by councils or town planners, or whoever has a say in whether a project can go ahead? Again, this may impact on a business’s ability to rebuild its operations due to a chance in society’s expectations. (Continued on page 14)
There is an active debate in the Australian recycling and packaging sectors about the design of our Container Deposit Schemes. The key issues include: 1. What should the rebate value be? 2. S hould the schemes include wine and spirit bottles (glass) like QLD has just announced? With the introduction of the Victorian and Tasmanian schemes we will for the first time have a national container collection arrangement. We want to talk to the rebate value in this article. What is the right value for the rebate? It is currently 10 cents.
History South Australia introduced its CDS scheme in 1977. It has run continuously ever since. It started with a 5c bottle return rebate, which was then increased to 10c in September 2008. When it was introduced, the value of 5c in 1977 was about 35c today (2024) based on RBA inflation rates. Of course, given it was a fixed 5c, its value to the person returning a bottle decreased each year due to inflation. Think of the effective rebate value as the “pulling power” or gravitational pull, of the rebate. The “pulling power” decreases over time due to inflation, until it is lifted again by regulation. If we plot the effective rebate value in 2024 values, against the capture rate of eligible containers, we can see what sort of impact the value of the rebate has on people’s behaviour. (Continued on page 18)
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