Report: New coal mines and power plants ‘effectively uninsurable outside China’
Almost two-thirds of reinsurers have time-bound coal exit policies, meaning that the insurance capacity available for coal power outside of China is “dwindling”, a new analysis has found.
Conducted by campaign organisation Insure Our Future, the analysis looks at the fossil fuel exclusions and exit policies of the 30 biggest insurance firms in the world in terms of the scale of their historic fossil fuel insurance.
It reveals that 62% of the firms offering reinsurance in the energy sector, by market share, have published coal exit policies. Allianz, AZA and Axis Capital are ranked as the firms with the strongest coal exit policies.
Allianz first refused reinsurance for coal-fired power plants and coal mines in May 2018. It has since expanded that commitment to cover new oil and gas fields, new oil-fired power plants and midstream oil infrastructure.
AXA, meanwhile, published its long-term coal exit strategy in 2019 and posted an update in 2021. Axis Capital stopped making new investments in companies developing new thermal coal mines or power plants in October 2021 and will phase out existing investment in, and reinsurance of, companies generating 20% or more of their revenues from thermal coal mining by 2025.
The report also notes an uptick in the adoption of coal exit policies in markets including the US, signalling that the trend is finally taking hold outside of Europe in earnest. Key US insurers The Travelers Companies (Travelers) and AIG are named in the report as two firms to have published their first coal exit strategies within the past 12 months.
These trends mean that the global insurance capacity available for coal now accounts for just one-tenth of the capacity available for the whole, global power sector. Insure Our Future has noted that the majority of this capacity is likely to be used to support projects in China. Coal, according to the IEA, accounted for 55% of China’s total energy consumption in 2021. Even in 2060, it may yet account for 20%.
The report notes, however, that there are still some major insurance and reinsurance firms backing coal expansion. Singled out at the UK market’s biggest laggard is Lloyds of London. Insure our Future has ranked it 25th out of the 30 companies, overall. The firm first published a coal exit policy in 2020, stating plans to phase out existing investments from firms deriving 30% of revenues or more from coal and other ‘aggressive’ fossil fuels by 2025. Insure Our Future argues that this may not be delivered.
Spotlight on oil and gas
The Insure Our Future analysis also looks at whether insurance firms are beginning to wind down support for oil and gas.
It notes that, this time last year, only three companies had adopted restrictions on conventional oil and gas project insurance – Suncorp, Generali and AXA. Now, there are 13 companies with such restrictions, collectively representing 15% of the primary insurance and 38% of the reinsurance market.
As conventional oil and gas exit plans are less common than coal exit plans, Insure Our Future has stated, the quality of the plans is mixed. The report notes that the firms with the strongest restrictions are not actually the major players in the fossil fuel insurance and reinsurance space.
The report also notes that companies are more likely to rule out financing a particular oil and gas project, such as a controversial pipeline, than to outline overarching exit plans.
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