Coal projects outside China become ‘uninsurable’, says climate group

New coal power projects are becoming “effectively uninsurable” outside China because many insurance companies have excluded their support, according to a report.

Recent commitments to stop underwriting coal by major US insurers AIG and Travelers brought the number of coal insurance exit policies to 41, according to the latest industry scorecard by climate campaign Insure Our Future.

The scorecard ranks the world’s top fossil fuel insurers based on the quality of their fossil fuel exclusion policies. It shows that 62% of the reinsurance market and 39% of the primary insurance market are now covered by coal exclusions, with Allianz, Axa and Axis Capital ranking first for the robustness and breadth of their policies.

Many of the remaining insurers without coal exclusions are not active in the fossil fuel sector.

Insure Our Future indicates that many of the major laggards who continue to underwrite new coal projects are unlikely to be able to mobilize the expertise and capacity needed to insure large and complex new coal plants.

There has also been a significant shift away from oil and gas. At the time of last year’s climate talks in Glasgow, only three companies had restrictions on insuring conventional oil and gas projects. But over the past year, 10 other insurers have followed suit.

The latest company to do so is the world’s largest reinsurer, Munich Re, which published an ambitious oil and gas exit policy earlier this month. This means that more than a third of the reinsurance market is now covered by oil and gas exclusions.

Peter Bosshard, who coordinates the international campaign Insure Our Future, attributes much of this change to the climate campaign. “So far, there has been no real regulatory pressure. And there was no market pressure…because in the short term, it’s always a profitable business. So we think public pressure really made a key difference.”

He adds that insurance companies have also felt the warmth of their employees. “Insurance companies have warned of climate risks for decades and have incorporated climate action into their public brands. So I think the pressure from outside has also triggered pressure from within.

The scoreboard identifies Britain’s Lloyd’s of London, the world’s largest energy insurance market, as a major laggard. He notes that the organization is one of the few remaining European insurers without an oil and gas exclusion and criticized its 2020 coal exit policy which makes it a non-binding guideline for its members.

Although it can be difficult to know what insurance companies are actually underwriting, climate activists have managed to draw attention to the industry’s role in particularly high-profile projects.

A total of 18 companies have now ruled out support for the East African Crude Oil Pipeline (EACOP), including two of Australia’s biggest insurers, QBE and Suncorp, and Italy’s biggest insurer, Generali.

Isobel Tarr of the UK-based Coal Action Network said the growing rejection of EACOP was a sign that the tide was turning on fossil fuel projects. “More and more insurers are assessing the risks and can see that a mega-pipeline… threatening Lake Victoria, Africa’s largest freshwater reserve, and contributing significantly to the climate crisis, not worth the risk.”

But she noted that all companies that did not exclude insurance for EACOP have syndicates at Lloyd’s of London, “where the companies behind EACOP would have sought insurance cover”.

She said Lloyd’s weak exclusions meant controversial coking coal mines, such as the Whitehaven mine in Cumbria, could still be insured, and called on the organization to exclude all new fossil fuel projects.

Despite the overall increase in exclusionary policies, activists say voluntary action is not enough and call for greater regulation. Insure Our Future noted that the EU’s ban on insuring the transportation of Russian crude oil in June – as part of the sanctions regime it imposed on Russia – demonstrated “that regulators can act quickly and effectively in crisis situations”.

In June, the UN-backed Race to Zero campaign made it explicit for the first time that members of net zero alliances “must phase down and relentlessly phase out all fossil fuels”. But Renaud Guidée, Axa’s chief risk officer and chairman of the Net Zero Insurance Alliance, resisted calls to require members to opt out of coverage.

A Lloyd’s spokesperson said the organization was “committed to delivering the transition to net zero by providing the vital risk management solutions that will enable multi-sector decarbonisation, investment and scale expansion in clean energy, as well as deploying an increasing proportion of capital to support climate innovations”.

Lloyd’s would not disclose how many of its unions have decided not to underwrite new coal projects, but said it has asked all managing agents to develop their own environmental, social and governance goals and policies. to be included in their underwriting strategies: it is up to everyone to decide their own climate objectives and policies, the company remains of the view that ceasing to provide new coverage to these classes, and phasing out existing coverage by 2030, remains a reasonable and pragmatic ambition to support the energy transition. ”

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