It’s Time for the Insurance Industry to Unfriend Coal

Insurance companies are supposed to protect us from catastrophic risks, and climate change is certainly the most serious risk that human society is facing.  In spite of this the insurance industry plays a critical role in enabling climate-destroying coal projects.

Every year coal kills millions of people through air pollution, accidents, and black lung disease.   Burning coal is also the single biggest contributor to climate change.   Even though better solutions are available, more than 1000 coal power plants are still in the planning cycle or under construction.   None of these projects can go ahead if average temperature increases are to stay below 2 degrees Celsius.

Insurance companies have a long-term self-interest in avoiding runaway climate chaos, which would make catastrophic weather events completely unpredictable.   “Left unchecked,” British insurer Aviva spelled out this threat most bluntly, climate change will “render significant portions of the economy uninsurable, shrinking our addressable market.”

In spite of their climate awareness and self-interest, insurance companies continue to be highly involved in financing coal and other fossil fuel projects.  With assets of $29 trillion under management, insurers belong to the world’s biggest investors.  According to a new report by Profundo, a research and advisory firm, Europe’s 15 biggest insurers and reinsurers have invested at least $131 billion in fossil fuel companies.

A separate report from Ceres, a group promoting responsible investment, found that the 40 largest insurance groups in the U.S. had invested at least 459 billion dollars in fossil fuels at the end of 2014.  U.S. insurers were on average even more strongly invested in the fossil fuel economy than other bondholders.

In a rapidly growing movement more than 700 institutional investors have divested from fossil fuels in recent years, and at least 24 international banks have committed to no longer finance coal projects.  The insurance industry is now also waking up to the threat.  Seven insurance companies from Europe and Australia – but none from the U.S. – have divested from coal over the past two years.

On April 26 France’s AXA was the first insurance company to stop enabling coal projects.  The world’s largest insurer announced at its annual general meeting that it would no longer offer property and casualty insurance to coal companies.  AXA argued that no longer underwriting coal would be consistent with its divestment from the coal sector.

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