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Insurers putting coal industry under pressure

Insurance companies are taking unprecedented action against the coal industry, campaigners have revealed.

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Many in the sector are ending insurance for coal companies, mines and power plants and excluding coal from $6T of investments, according to the Unfriend Coal campaign’s second annual scorecard on the industry, which was released this week.

 

Momentum against coal is growing as four of the world’s biggest insurers have announced new restrictions on coal insurance this year, bringing the total number to seven. However, as the UN Climate Summit gets underway in Poland, the report revealed that insurers in the US, Japan and Australia are still supporting an industry that is undermining efforts to avoid dangerous climate change.

 

Peter Bosshard, Unfriend Coal coordinator, said: “Some of the world’s biggest and most trusted insurers are now exiting the coal sector, sending a strong message to governments and investors that the dirtiest fossil fuel has no future. Going forward, we will focus attention on the laggards in order to reach critical mass and make coal uninsurable.”

Unfriend Coal's 2018 coal scorecard
Unfriend Coal's 2018 coal scorecard

Insuring Coal No More: The 2018 Scorecard on Insurance, Coal and Climate Change revealed that Europe’s four biggest primary insurers have now restricted insurance for coal. Allianz and Generali limited underwriting, and AXA tightened its policy this year, while Zurich announced restrictions in November 2017.

 

The report also showed that one third of the reinsurance market has now restricted cover for coal. Reinsurance giants Swiss Re and Munich Re announced underwriting restrictions this year, going beyond those already announced by SCOR.

 

At least 19 major insurers with more than US$6T in assets – 20% of the industry’s global assets – have divested from coal, up from US$4T and 13% a year ago. Generali, Lloyd’s, Hannover Re, AG2R La Mondiale and Groupama announced new divestment policies this year while AXA, Allianz and Munich Re strengthened their policies.

 

Insurance broker Willis Towers Watson has warned that “finding alternative sources [of coal insurance] is likely to become increasingly challenging – especially if North American insurers begin to follow the European lead”.

 

The report noted: “Just as significant as the contraction in insurance market capacity may be the withdrawal of expertise.” Only a small group of insurers have the ability to lead on due diligence for power plants in Asia, where most new coal projects are being developed, and all of these global leaders have ended or limited involvement except AIG and Chubb. If others step in to fill the gap, they may charge higher premiums because they lack a mass market and are likely to require more reinsurance.

 

The scorecard ranks 24 of the world’s biggest insurers on their action on coal and climate change, assessing and scoring their policies on underwriting, divestment and other aspects of climate leadership. It is based on responses to a questionnaire from 18 companies, including all European and Asia-Pacific insurers, and on publicly available information.

 

Swiss Re ranks highest for the most comprehensive policies on both coal insurance and divestment. The insurer has divested from companies relying on coal for more than 30% of their mining income or power generation, and it announced in July that it would no longer offer them insurance cover. The policy applies to both existing and new projects and across all lines of business worldwide. Its underwriting and divestment policies also cover tar sands and other extreme fossil fuels.

 

In Europe, most major insurers have by now taken action on coal. Out of 10 major companies assessed on underwriting, all but three have ended or limited insurance for coal projects: Mapfre is considering action, Lloyd’s is in a special position as a marketplace, while Hannover Re is continuing to actively support coal.

 

Of 12 major companies assessed on investment, all but three have divested – Mapfre has stopped making new investments, while Aviva and Legal & General are focusing on engagement with coal companies.

 

In the US, none of the nine leading insurers assessed have taken action on coal. Companies like AIG, Chubb, Liberty Mutual and Berkshire Hathaway continue to underwrite and invest in the industry.

 

Asia-Pacific insurers also continue to insure and invest in coal, although there are the first signs of change. Three of Japan’s largest life insurance companies – Nippon, Dai-ichi and Meiji Life – have announced they will no longer fund new coal projects. Australia’s QBE is currently reviewing its coal underwriting and investment policies.

 

However, even the coal exit policies of European insurers still contain large loopholes, according to Unfriend Coal. “Some fail to cover leading coal developers because their definition of coal companies is exceedingly narrow. Others do not apply to certain types of insurance or only restrict certain coal projects. Most divestment policies do not apply to assets insurers manage on behalf of third parties – more than US$1T in the case of Allianz.”

 

 

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