A new report has found that projects featuring coal outside China are becoming uninsurable. This is because insurance companies have stopped underwriting the project. The latest industry scorecard by Insure Our Future shows that commitments to stop insuring coal by major insurers such as Travelers and AIG have reduced the number of insurance exit policies for coal to 41.
This scorecard rates the major fossil fuel insurers around the globe based on the quality of their exclusion policies for fossil fuel. It shows that 39% of the primary insurance market and more than 60% of the reinsurance market are covered by coal exclusions. Axis Capital, Axa and Allianz are among the top firms, based on the breadth and robustness of their policies.
Insure Our Future, a climate campaign, stated that most of the companies that are still underwriting new coal projects probably are unable to mobilize the capacity and expertise required to insure complex and big new coal power plants.
The industry has also observed a shift from the use of gas and oil. During the 2021 climate talks that took place in Glasgow, only three companies had any restrictions on underwriting conventional oil and gas projects. In the last year, however, 10 additional insurance companies have jumped on the bandwagon. The latest company to follow suit is Munich Re, which is currently the biggest reinsurer globally. Earlier this month, the company published an oil and gas exit policy.
This latest addition to the group means that more than one-third of the reinsurance market is covered by oil and gas exclusions. The coordinator of the Insure Our Future campaign, Peter Bosshard, attributed this shift to climate campaigning. Bosshard explained that despite the lack of any real regulatory pressure or market pressure, public pressure had made a significant difference. He noted that in the short term, however, oil and gas was still profitable.
The latest scorecard notes that Lloyd’s of London, which is based in the United Kingdom, is among the few remaining insurers without an oil and gas exclusion in Europe. The company has, in the past, been criticized for its 2020 coal exit policy. A spokesperson of the organization recently stated that the company was committed to insuring the transition to net zero by offering risk-management solutions that would facilitate large-scale, clean-energy investment and expansion and multisector decarbonization.
While the organization hasn’t yet revealed how many of its syndicates will no longer underwrite new coal projects, it has asked its managing agents to come up with their own ESG policies and targets for inclusion in their insurance strategies.
However, as the current global energy crisis persists, coal-industry actors such as Peabody Energy Corporation (NYSE: BTU) will continue to see high demand for the coal they produce, at least for the foreseeable future.
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