With a new policy to stop insuring coal projects and companies, Swiss Re just issued a strong warning sign that the insurance industry doesn’t see a future for the coal sector. After AXA, Allianz, SCOR and Zurich, Swiss Re is the fifth large insurance company to stop or limit coverage for coal projects.
As major insurers exit the coal sector, smaller competitors may be tempted to fill the gap. Since they don’t have the deep expertise of traditional coal insurers, they will need more reinsurance to take on the risks of multi-billion dollar coal projects. The new policy from Swiss Re, which was the largest reinsurer by premiums in 2016, helps to narrow this potential loophole. The spotlight is now on Munich Re, the second global reinsurance giant, to do the same.
Munich Re was the first insurance company to warn about the risks of climate change in 1973, yet they continue to underwrite climate-destroying coal projects. Research by the Unfriend Coal campaign found recently that Munich Re has been the biggest insurer of new coal mines and power plants in Poland since 2013. With a global petition that has already garnered more than 500,000 signatures, AVAAZ is currently asking Munich Re to turn their climate rhetoric into action and exit the coal sector.
The new Swiss Re policy covers reinsurance both for specific coal projects and for companies that depend on coal for more than 30% of their business. While this is positive, the policy still needs to exclude any other companies which develop new coal projects, and needs to create mechanisms to exclude coal companies from coverage as part of broad reinsurance package deals (so-called treaty reinsurance).
In a press release the Sunrise Project and our German partner group Urgewald, which are both engaged in the international Unfriend Coal campaign, welcomed the new Swiss Re policy and called on the company to address the remaining gaps.
On the day before Swiss Re announced its new policy, a power sector expert with Marsh, the world’s biggest insurance brokerage company, estimated that insurers offering up to $1 billion in coal insurance have so far adopted coal exit policies. Marsh believes that ample insurance for most coal projects is still available, but that developers of projects that are considered risky may find it difficult to find affordable insurance. As the Swiss Re decision suggests, the shift of insurers away from coal will only continue.
While five insurers have so far stopped or limited insuring coal projects, 17 major insurers with combined assets of more than $6 trillion have divested from coal companies. By doing so they have pulled an estimated $30 billion in investments out of the coal sector. Governments and investors which still see a future in carbon should take note of this growing shift away from coal among the world’s ultimate risk managers.