Insurers pull out of fossil fuel projects amid climate change fears

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BERLIN (AP) — Insurance companies that have long said they would cover anything, at the right price, are increasingly excluding fossil fuel projects because of climate change — to cheers from environmental activists.

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More than a dozen groups that track insurers’ policies on high-emission activities say the industry is turning its back on oil, gas and coal.

The alliance, Insure Our Future, said on Wednesday that 62% of reinsurance companies – which help other insurers spread their risk – plan to stop covering coal projects, while 38% now exclude certain oil projects. and natural gas.

In part, investors are calling for it. But insurers have also begun to make the connection between fossil fuel infrastructure, such as mines and pipelines, and the impact of greenhouse gas emissions 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 in economic impacts of extreme weather conditions at the University of Waterloo, Canada. .

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

In some insurance markets, like Florida, people are already struggling to get coverage for hurricanes and other disasters that are expected to become more powerful with global warming.

“If climate change continues at its current rate, the markets where they can provide insurance at a rate people can afford will erode,” Thistlethwaite said.

READ MORE: Climate change makes global summer droughts 20 times more likely

Earlier this month, Munich Re, one of the world’s largest reinsurers, said it would stop supporting new oil and gas fields from next 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.

Indeed, projects that require large amounts of capital are unlikely to attract investment if they cannot obtain insurance to cover potentially costly accidents.

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

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

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

Many insurers reviewed have introduced their restrictions in the past year, although the exact policies differ significantly, according to the report.

Some countries have meanwhile proposed applying the idea of ​​insurance to help nations facing huge costs from climate change.

Germany, which chairs the Group of Seven major economies, and the V20 alliance of vulnerable nations, chaired by Ghana, agreed last week to promote the idea of ​​a “global shield” against climate risks.

The proposal, which will be discussed at next month’s UN climate summit in Egypt, responds in part to demands from poor countries for increased financial assistance to deal with loss and damage from rising global temperatures.

Thistlethwaite said such projects will require private sector involvement.

“Western governments are unwilling to take responsibility for the climate risk for which they are ultimately responsible,” he said.

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