The Insurance Australia Group (IAG) has withdrawn its support for the NSW Government's plan to raise the Warragamba Dam wall.
IAG, one of Australia's largest insurance organisations, cited the potential destruction of the natural environment and culturally significant sites as the reason for its withdrawal of support.
The state government has proposed raising the dam wall in an effort to mitigate the risk of flooding in the Hawkesbury region.
However indigenous residents, scientists, environmental action groups, local councils, politicians and the United Nations Educational, Scientific and Cultural Organization (UNESCO) have raised various concerns about the plan.
The IAG's chairwoman Elizabeth Bryan said the organisation would no longer support the plan to raise the dam wall at a recent AGM.
"In discussions with The Colong Foundation for Wilderness, and others more closely involved with this debate, it has become clear that a decision to raise the height of the Warragamba Dam wall could well result in the destruction of both large areas of natural environment and also important cultural heritage sites," she said.
"At IAG we have extensive data and experienced technical people who have used this data to evaluate the significant flood risk in the valley below the Warragamba Dam.
"In the past we have expressed support for the raising of the wall, however we now have additional information concerning the probable loss of significant cultural heritage sites, and important natural habitats."
Ms Ryan said the IAG would "continue to support the need for flood risk mitigation in the Hawkesbury-Nepean Valley to reduce the risk to life and property".
"However, given our increasing awareness of the environmental and cultural heritage issues, I make the commitment that we will step back from advocating for a specific solution, including the raising of the Warragamba Dam wall," she said.
"Instead, we will support appropriate environmental impact studies to explore the best way to achieve safety for the residents of the Hawkesbury-Nepean Valley, while recognising the issues presented by The Colong Foundation for Wilderness."
Gundungurra woman and Warragamba resident Kazan Brown said the IAG had become the latest company to understand giving 'lip service' to preserving culture and art dating back tens of thousands of years was not enough.
"There has been a shift. I have to assume Rio Tinto has set it off," Ms Brown said.
"These sites are what my family have left behind. They are part of us. It's who we are.
"If the sites go under the only place our culture will exist is in history books. Most went under when the original Warragamba Dam was built in 1960."
Rio Tinto, one of the country's largest mining companies, has faced recent criticism over its decision to legally destroy the culturally significant Juukan Gorge caves in Western Australia despite concerns raised by indigenous traditional land owners.
Colong Foundation for Wilderness campaign manager Harry Burkitt said western Sydney minister Stuart Ayres had become almost completely isolated as the sole advocate for the dam raising proposal.
"This represents a major shift of sentiment from the insurance industry on raising the Warragamba Dam wall," he said.
"We are grateful for the serious engagement from the chairwoman and her senior executive team.
"We look forward to developing a co-operative relationship moving forward.
"It's now time for Suncorp, QBE and the Insurance Council of Australia to adopt the same position as IAG on this culturally and environmentally destructive dam proposal.
"Stuart Ayres' shambolic Environmental Impact Statement (EIS) process has convinced no one of the dam proposal's merits.
"It is clear he doesn't have the support of federal government agencies, NSW Government agencies, nor even the biggest player in the Australian insurance industry.
"He's become a lonely shag on a rock."
Wollondilly councillor Matthew Deeth, who helped to unite Wollondilly Council with the Blue Mountains Council against the controversial plan, said the IAG's response was an important step.
"I think it's really important in light of the destruction of indigenous heritage by Rio Tinto over in the Pilbara," he said.
"We need to look at all the solutions available to mitigate the flood risk in the Hawkesbury region."
A NSW Government spokesman said the Hawkesbury-Nepean Valley was the most flood-exposed region in NSW, if not Australia.
"More than 130,000 people currently live and work on the floodplain," he said.
"Research has shown the proposal to raise Warragamba Dam to temporarily hold back floodwaters is the most effective long-term option to reduce flood risk and protect lives, homes and livelihoods.
"The impacts of a temporary increase in upstream inundation - and options to manage, mitigate or offset those impacts - will be detailed in the EIS currently being prepared.
"The NSW Government looks forward to the public exhibition of the EIS, which will allow all interested stakeholders to provide comment when all information is equally available.
"The final decision on the dam raising proposal will only be made after all environmental, cultural, financial and planning assessments are complete."
Western Sydney minister Stuart Ayres did not respond to the Advertiser's questions about the IAG's decision to withdraw its support for the plan.
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