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Insuring Coal No More

The Unfriend Coal campaign calls on insurance companies to stop underwriting and investing in climate-destroying coal projects. This monthly newsletter shares campaign highlights on climate, coal, and the insurance industry.

Coal insurance market dwindling, Marsh finds

According to Glenn Preece, a senior vice president at insurance broker Marsh, the market for power generation property insurance has a total capacity of $6-7 billion and is still growing. Yet due to recent policy changes, market capacity for coal-fired generation has potentially shrunk by $1 billion. An even bigger concern for the coal industry is the shrinking number of insurance companies which are prepared to take the lead on complex coal projects. According to Preece, the withdrawal of insurers from coal “could potentially impact owners, developers and their investor’s ability to obtain commercially viable insurance terms”.

In two new briefing papers, Marsh analyzes the state of the power and mining insurance markets in more detail.

Swiss Re adopts coal exclusion policy

On July 2 Swiss Re adopted a policy under which it will no longer offer re/insurance to companies with more than 30% exposure to thermal coal. The policy applies to facultative business lines, but not to the reinsurer’s treaty business. With the new policy, Swiss Re “supports a progressive and structured shift away from fossil fuels”.

In a statement, Greenpeace and the Unfriend Coal campaign welcomed the new Swiss Re policy, which sends a further signal that “coal insurance is going out of fashion”. Going forward the reinsurer should extend its policy to all companies which are developing new coal projects, and also cover the companies reinsured under its treaties by the policy.

Insurers commit to support World Heritage Sites

More than 100 World Heritage Sites are imperiled by mining, dam building, wars and other factors. On July 3 a group of insurers signed a commitment to protect such sites in partnership with UNESCO, UNEP, the Principles for Sustainable Insurance and WWF. As part of the commitment, the insurers pledge to develop and implement guidelines that “prevent or reduce the risk of insuring and investing in companies or projects whose activities could damage World Heritage Sites, whenever possible”.  

Even if clauses such as “whenever possible” weaken the declaration, the involvement of two UN organizations lends it credibility as a new standard which insurers are expected to fulfill. The declaration also confirms the growing expectation that insurers take responsibility for the impacts of the projects which they underwrite.

Unfriend Coal momentum reaches Japan

Following through on announcement the company made in late April, Nippon Life Insurance on July 12 decided to reject investments and loans for new coal-fired power projects at home and abroad as the first Japanese financial institution. “It was difficult," a Nippon Life executive said according to the Asahi Shimbun. "But we, as a life insurance company, which is supposed to offer society a huge public benefit, decided not to do that.”

In the coming weeks, JACSES, a Japanese NGO, will publish a report scoring the climate policies of eight leading Japanese insurance companies.

Investors tell Munich Re to ditch coal

Munich Re, the first insurer to warn about climate risks in 1973, has so far refused to stop insuring coal projects. On July 9, the global campaign group AVAAZ delivered a petition with currently more than 800,000 signatures to the reinsurer asking the company to stop insuring and divest from coal and tar sands. The petition was accompanied by a protest at the Global Insurance Forum in Berlin and a full-page ad in the Financial Times.

According to a Reuters story, several major shareholders have expressed their displeasure with Munich Re’s support for more coal projects. “From a risk perspective, every insurer should have an (underwriting) policy on coal,” the story quoted Ingo Speich, a fund manager at Union Investment, as saying. The pressure on Munich Re and other laggards will continue.

Watchlist: Ledvice coal project

In early July the power utility of the Czech Republic tendered the insurance contract for its 660 MW Ledvice III lignite-fired power unit. Pollution from the Czech coal fleet is estimated to have caused 1,330 premature deaths in 2015, and Ledvice, which in the past was underwritten by Generali and other insurers, would undermine the EU’s ability to phase out coal in line with the Paris Agreement.

Organizations engaged in the Unfriend Coal campaign sent a letter to insurance companies asking them not to underwrite Ledvice III. They will closely monitor which insurer is still prepared to prop up coal projects at this time.

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Got a news story or campaign action you want us to share? Email Peter Bosshard and we’ll look at including it in our next newsletter. 

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