While coal premiums soar, insurance groups still supports oil and gas

Lloyd's of London is the last major EU investor still underwriting coal [Vladimir Agafonkin / Flickr]

Insurance companies have accelerated their withdrawal from coal this year, making it costlier to secure insurance for new projects. However, the insurance industry is still underwriting oil and gas companies, according to new research.

Momentum is growing behind calls for the financial sector to withdraw from fossil fuels, according to the Insure Our Future campaign’s fourth annual scorecard, published on Wednesday (2 December).

“Insurers’ continuing shift away from fossil fuels is positive, but in the face of a worsening climate crisis it needs to accelerate,” said Peter Bosshard, Coordinator of the Insure Our Future campaign, which scrutinises insurers’ climate policies.

At least 23 companies have ended or limited their cover for coal projects since 2017, representing 12.9% of the primary insurance market and almost half of the reinsurance market, the report found.

More than 65 insurers with combined investments worth $12 trillion have either adopted a divestment policy or committed to making no new coal investments, it said.

“We can see that the momentum in coal is having an impact on the viability of many companies in the coal industry to secure insurance coverage. It’s not that easy anymore to secure such coverage,” said Lucie Pinson, executive director at Reclaim Finance, a green pressure group.

European companies AXA and Swiss Re are the leaders when it comes to ending fossil fuel insurance, followed by Hannover Re, Zurich and Munich Re. Most of these company’s policies address coal and tar sands.

In contrast, Lloyd’s of London is the last major insurer in Europe to continue underwriting coal. While its central fund is divested from coal, Lloyds has not instructed its 90-plus syndicates to do so, the researchers found, saying these make up 97% of the group’s market.

“Lloyd’s of London and its members insure and invest in some of the world’s worst fossil fuel projects,” said Flora Rebello Arduini, from SumOfUs, a non-profit organisation.

“There is no pride in being the insurer of last resort for a dying and destructive industry, Lloyd’s must stop its legacy of climate destruction,” she added.

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East Asia and America moving slower

In November, Samsung Fire and Marine became the first Asian insurer to announce action, but the Asian market is moving slowly.

Japan’s three main insurers and China’s Ping An have announced very basic restrictions, but continue to be major insurers of coal.

America insurers lag behind the rest of the world, with Liberty Mutual and The Hartford restricting coal insurance in the last year, but with significantly weaker policies than European leaders.

Other American insurers have not taken any action on fossil fuels and all ten insurers assessed continue to support lobbying action against climate action.

“Laggards like Lloyd’s, AIG and Tokio Marine need to stop insuring coal, and all insurers need to also phase out support for the oil and gas industry,” said Bosshard.

Oil and gas

But while insurers are divesting from coal, they are still underwriting oil and gas. Burning coal is responsible for 40% of CO2 emissions not related to land use, while oil and gas combined account for 55%.

New fossil fuel projects are not consistent with a 1.5°C pathway and could lead to stranded assets, environmentalists say.

“We can’t just congratulate ourselves for the growing trend of insurers leaving the coal sector. We also need to take care of the oil and gas industry. It’s not a question of choosing which one we need to tackle first. Both need to go into decline,” said Pinson.

The scorecard looked at insurers’ commitments to oil and gas for the first time this year. While the number of insurers who have limited or ended cover for tar sands has increased from five to nine, Australia’s Suncorp is the first and only company to announce a phase-out of all oil and gas coverage, the research found.

About 70% of the global oil and gas market is covered by ten insurers, including AIG, Travelers, Zurich and Lloyd’s. A quarter of the market is provided by insurers that back a 1.5°C climate target.

“European insurers have led the industry’s retreat from coal and now they must step up and lead action on oil and gas,” said Pinson.

“Allianz, AXA, Munich Re and Zurich have pledged to align their investment portfolios with 1.5°C, and if they are serious about this target they must stop insuring and investing in companies which plan new oil and gas production,” she added.

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[Edited by Frédéric Simon]

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