Earth Protect Blog

By Frank Jordans

The Associated Press

BERLIN>> Insurance companies that have long said they will cover anything at the right price increasingly are ruling out fossil fuel projects because of climate change — to cheers from environmental campaigners.

More than a dozen groups that track what policies insurers have on high-emissions activities say the industry is turning its back on oil, gas and coal. The alliance, Insure Our Future, said Wednesday that 62% of reinsurance companies — which help other insurers spread their risks — have plans to stop covering coal projects, while 38% are now excluding some oil and natural gas projects.

In part, investors are demanding it. But insurers also have begun to make the link between fossil fuel infrastructure, such as mines and pipelines, and the impact that greenhouse gas emissions are having on other parts of their business.

“Like banks, insurers can leverage access to their services as an incentive to reduce greenhouse gas emissions or exposure to the physical risks of climate change,” said Jason Thistlethwaite, an expert on the economic impacts of extreme weather at the University of Waterloo, in Ontario.

“It’s the same idea as an insurance company raising your property insurance rates because you engage in risky behavior, like drunk driving,” he added. “But in this case, it’s the fossil-fuel sector that’s engaging in risky behavior by contributing to climate change.”

In some insurance markets, such as Florida, people are struggling to get coverage for hurricanes and other disasters that are forecast to become more potent with global warming.

“If climate change continues at its current rate, markets where they can provide insurance at a rate people can afford will erode,” said Thistlethwaite. This month Munich Re, one of the world’s biggest reinsurers, said it would stop backing new oil and gas fields beginning in April.

“Insurance is the Achilles heel of the fossil-fuel industry and has the power to accelerate the transition to clean energy,” said Peter Bosshard, the report’s author.

That’s because projects that require large amounts of capital are unlikely to attract investment if they can’t get insurance to cover potentially costly mishaps.

“It’s not ideal for a large-scale fossil-fuel project to lose a brandname insurer with a good reputation,” Thistlethwaite said. “Smaller insurers are likely to fill the gap, but they could be more expensive.”

Insure Our Future said its annual scorecard of 30 companies ranked Allianz, AXA and Axis Capital best for their coal exit policies, while Aviva, Hannover Re and Munich Re came out on top for oil and natural gas.

By contrast, some insurers such as Berkshire Hathaway, Starr and Everest Re have adopted few or no restrictions coal, oil or gas projects, it said. The alliance also criticized Lloyd’s of London for announcing plans for ending coal coverage two years ago but then declaring it optional.