Insurance for Dumfries MBT plant up 90% as ‘appetite for waste deteriorates’

The MBT facility was built as part of a 25-year PFI-backed contract between the council and Shanks (now Renewi) in 2004 (see letsrecycle.com story). Renewi said in 2018 that it was leaving the contract 10 years early after posting losses on the deal, and ownership of the plant transferred back to the council.

A report to go before Dumfries & Galloway’s finance committee today explained that since 2021, the plant has been insured by a specialist company, Rokstone. This sees the council pay a £468,000 annual premium for £10 million of cover and a policy excess of £100,000. This expired in September 2023.

The report outlined that Rokstone indicated that they were unwilling to continue to be the sole insurer of the facility.

During negotiations, the council said that finding a new provider has been difficult, because of the “number of significant fire events at waste sites across the UK recently and, because of the significant losses being experienced by insurers”.

However, it did receive one offer from Starr Insurance Company to provide insurance on a like-for-like basis. However, this would cost the council £896,000 per year instead.

Costs

The MBT facility is an important part of the waste processing infrastructure in the region. Residual waste is sent to the plant, where moisture is removed, glass and aggregates are taken out and the rest is prepared for RDF.

For context, the report outlined that the the alternative cost of utilising an external provider to divert the council’s waste arisings (instead of going through the MBT facility) would be in the region of £4.06 million per annum, subject to fluctuations in market conditions.

“To ensure continuity of cover and reduce the financial risk to the council of a significant event, it is officers’ recommendation to accept the insurance offer from Starr, with the additional cost of the premium (£428k) to be funded through a combination of existing budget resources and the Waste Review Reserve.”

Other options available to the council such as self-insurance, “could be explored”. These however would require further analysis and consideration as to the cost effectiveness of these, understanding these would result in an increased acceptance of risk.