Report: Coal Becoming Uninsurable as Cover Withdrawal Doubles
By Sarah George
December 2, 2019 - Written by global NGO network Unfriend Coal, the report states that 17 of the world’s biggest insurers have now published coal exit policies – up from eight in December 2018.
This cohort of businesses accounts, in terms of assets under management (AUM), for almost half (46%) of the world’s reinsurance market, and 9.5% of the global primary insurance market.
The Shotton surface coal mine in Northumberland.
Image: Rab Lawrence
Insurers to have published coal exit policies since November include the likes of BNP Paribas, which has set a 2040 cut-off point, and AXA, which is targeting the same deadline and asking clients to publish phase-out plans by 2021. Outside of Europe, Australian finance giants Suncorp and QBE also announced exit policies this year.
In addition to forward-looking plans, the Unfriend Coal report tracks divestment made to date. It states that more than one-third (37%) of the coal industry’s global assets have faced divestment in the past 12 months, with insurers having withdrawn $8.9trn (£6.9trn). Globally, 35 investment firms have taken some form of divestment action, Unfriend Coal claims.
Unfriend Coal’s report comes after analysis from Carbon Tracker revealed that electricity production from coal is on track to fall by around 3% globally in 2019 - the largest year-on-year drop on record. But, like Carbon Tracker, its findings paint a mixed picture globally – with Europe leading the way and slower progress being recorded in the US and elsewhere.
Unfriend Coal specifically names US-based AIG and Liberty Mutual, alongside Asian insurers Tokio Marine, Samsung Fire & Marine, Sinosure and SOMPO, as some of the world’s largest remaining coal financers.
The group additionally claims that, although measures to stop insuring new coal projects are emerging at a pace within the finance sectors, most companies are willing to continue covering existing operations.
“The role of insurers is to manage society’s risks – it is their duty and in their own interest to help avoid climate breakdown,” Unfriend Coal’s coordinator Peter Bosshard said.
“The industry’s retreat from coal is gathering pace as public pressure on the fossil fuel industry and its supporters grows. However, major US and Asian insurers continue to undermine international climate action by insuring and investing in coal projects. All responsible companies must make coal uninsurable by ending support for both new and existing mines and power plants, including the Adani Group’s destructive Carmichael coal mine in Australia.”
The Australian mining project referred to by Bosshard is located in the Galilee Basin and, according to Greenpeace, will result in the emission of 4.6 billion tonnes of CO2 across its lifetime. However, Adani Group have faced challenges securing investment for the facility, with 16 international insurers having rules out underwriting the project. In a recent media briefing, the company said that completing the mine by 2021 would still require unspecified additional investment from “the family”.
Unfriend Coal is predicting that more coal projects will face these kinds of challenges in the future, with trends in the insurance sector compounded by increasing climate lawsuits against fossil fuel companies. One of the most high-profile cases at present involves ExxonMobil, which stands accused of “misleading” the general public on the fossil fuel sector’s contributions to climate change.
Moreover, financiers are being urged by the Chief Risk Officers Forum – an industry trade body – to participate in a “massive and globally coordinated response” to mitigate climate risks, including “phasing out” fossil fuels from their underwriting and investment activities. This call to action is broadly expected to be reiterated and amplified at the UN's COP25 summit this month.