You can’t drive a car or buy a house without insurance. Likewise, the coal industry can’t get their mines and power plants funded without insurance coverage.
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.
“Left unchecked…[climate change will] render significant portions of the economy uninsurable, shrinking our addressable market.”
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.