A campaign working to drive a wedge between the insurance and fossil fuel sectors reported that U.S. insurance companies are still adopting exclusionary policies for coal or other fossil fuel projects at a rate slower than most of their global peers and said coal is becoming increasingly "uninsurable."
U.S. insurance companies play a key role in supporting the fossil fuel industry, while many insurers in Europe and Australia have committed to no longer supporting new coal mining projects, according to the Insure Our Future campaign's fourth annual scorecard on insurers' climate policies. The group of activist organizations said that, since the campaign started in 2017, at least 23 companies representing 12.9% of the primary insurance market and nearly half the global reinsurance market have ended or limited coverage of coal projects, dealing a further blow to an already beleaguered sector.
The insurance industry's support is crucial to fossil fuel companies trying to expand, Bill McKibben, a co-founder of international climate campaign 350.org and a leader in the global divestment movement, told S&P Global Market Intelligence. McKibben said the sector is also among those that know "what's going on with the climate crisis," given their focus on assessing risk.
"Look, 'insurance' is one of the most boring words in the English language, so they've been left alone a little," McKibben said. "But now people recognize the scope and danger of their involvement in funding the climate crisis."
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The report named AXA SA and Swiss Re AG as leaders in ending fossil fuel underwriting while pointing to insurers including American International Group Inc., Berkshire Hathaway Inc., Lloyd's of London Ltd. and Travelers Cos. Inc. as companies underwriting coal with no restrictions.
Travelers CEO Alan Schnitzer said in September that the company does not write a lot of coal-related business. "At the moment, the economy is, at some degree, reliant on coal, and so we can't completely abandon it," the CEO said at a Sept. 15 conference. Similarly, American International Group CEO Brian Duperreault said in early 2020 that the industry could not quit the coal sector "cold turkey" and called for a transition away from fossil fuels.
Berkshire has said it "should not limit its universe of potential investments based upon complex social and moral issues," in past securities filings addressing coal divestment attempts. In 2018, a spokesman said Lloyd's is "very concerned about the threat posed by climate change," while adding that "fossil fuels are an integral part of our global economy and they do require insurance."
The new scorecard also highlights divestment efforts and ranks insurers on climate leadership by assessing their lobbying support and other measures to align with goals consistent with the Paris Agreement on climate change.
While six U.S. insurers have rolled out a policy on coal, "most are riddled with loopholes," the group said. It reported that, along with U.S. insurance companies, Lloyd's and insurers in East Asia continue to support coal mine expansions.
Coal companies have reported difficulties in securing insurance, and Peabody Energy Corp. recently had to strike a deal with its insurance provider when it demanded more collateral. Other companies have also pointed to the movement to pressure insurers and financial companies as a risk to coal companies.
Elana Sulakshana, an energy finance campaigner with the Rainforest Action Network, said in an interview that the Insure Our Future campaign makes a direct impact as well as a symbolic one.
"An insurance company, as an arbiter of risk in our society, says, 'No, that coal project or this coal industry is too risky,' and that has ripple effects across the economy and society," Sulakshana said.
The latest Insure Our Future report found that, in addition to not offering policies to coal projects, insurers are also shifting capital away from the fuel. The combined assets of insurance companies committed to either the divestment of coal or a ban on new coal investment increased from $4 trillion in 2017 to $12 trillion in 2020. That represents around 40% of the industry's total assets, the report added.
For the first time, the group's annual assessment also evaluated insurers' oil and gas commitments. The report found that nine insurers, none of which are in the United States, have limited or ended coverage for tar sands oil, while only Australia's Suncorp Group Ltd. has committed to completely phasing out oil and gas.
North American insurers have a large market share of the underwriting for the oil and gas industry, especially in the U.S., Sulakshana said. "We are starting to move beyond [coal]. Oil and gas is going to be the key nut to crack globally."
Sulakshana said she expects the movement pushing insurers away from fossil fuels will increase as the campaign ramps up its efforts. In the U.S., she said she expects the incoming Joe Biden administration may result in increased focus on climate and financial issues by federal regulators.