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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.

With VIG, the next insurance domino falls

Vienna Insurance Group (VIG) is an Austrian insurer with a strong presence in Central and Eastern Europe. The company recently acquired subsidiaries with an active involvement in the Polish coal sector, and in November 2018 was exposed for insuring the 660 MW lignite power plant in Ledvice/Czechia.

Under pressure from Greenpeace and other Unfriend Coal campaigners, VIG earlier this week became the 8th insurer announcing a reduction of its coal business. With immediate effect, the company will no longer insure “any new coal risk nor any new coal mining or coal power plant construction project”. In countries with a coal exit strategy VIG will also phase out insurance for existing projects and for companies that depend on thermal coal for more than 50% of their business. In countries without such a strategy (where it is mainly active) it vaguely commits to “pursue a consistently declining underwriting strategy of existing risk insurance”, and will at least not pick up business from rivals exiting the sector.

VIG also announced that it would cease investing in (but not divest from) companies which depend on thermal coal for more than 50% of their business. However, most divesting insurers set a bar of 30% or lower and VIG’s weak threshold fails to exclude some of the world’s biggest coal companies.

“VIG’s announcement that it will no longer insure new coal plants and mines is welcome and will put pressure on its Austrian rival Uniqa to follow suit”, Lucie Pinson, European coordinator of the Unfriend Coal campaign, commented. “However, its new coal policy has serious flaws and is substantially weaker than those of major insurers such as AXA and Allianz, particularly with regards to phasing out cover for existing operations. While some countries such as Italy will be impacted, VIG falls way short of what is needed to phase out coal in Europe by 2030.”

Insurers' coal exit starting to bite, finds Willis Towers Watson

Insurers’ retreat from the coal sector has led to a “significant reduction in available capacity” and “may help to accelerate the global retreat from coal”, Willis Towers Watson’s 2019 Power and Renewable Energy Market Review finds. According to the broker, the trend complicates securing insurance particularly for individual coal projects and creates “upward pressure on rates and coverages”.  

The review indicates that “having to factor this element into their bidding will put [coal companies] at a commercial disadvantage when competing with lower-cost greener generators”. Mining companies and utilities with a strong focus on coal will be particularly affected by this trend. At the same time, insurance companies are looking “to promote renewable energy for public relations reasons, as well as replace premium lost by exiting the coal-generation space”.

The Willis Towers Watson report points out insurers which continue to insure coal projects and companies, including FM Global, AEGIS, AIG, HDI, Liberty Mutual and Berkshire Hathaway. Unfriend Coal campaigners have taken note.

A red card for Aon's climate hypocrisy

As forward-looking actors in the industry are leaving the coal sector, insurance broker Aon has identified a business opportunity in undermining the climate leadership of the insurers who are taking action on coal. In several recent articles and webpages, Aon executives are advertising their services in helping coal companies to circumvent the coal exit policies of climate-conscious insurance companies.

“Over the next few years”, Aon states, “we will be working hand-in-hand with clients to identify what insurances may be withdrawn from their program, followed by actionable plans to close those gaps. In most cases, this will involve the identification of alternative insurers to on-board into their insurance program – whether this is insurance from new markets, or through unexplored relationships.”

Like other brokers, Aon has warned about the risks of climate change in its publications. In the September 2018 report, Climate Change Challenges, Aon emphasized that “a rapid shift away from fossil fuels in favor of renewable energy sources is needed”. The consequences of failing to take action in time “may be catastrophic”, the broker warned. In a blog post, the Unfriend Coal campaign showed Aon, the t-shirt sponsor of Manchester United, a symbolic red card for its climate hypocrisy.

The heat is on, chief risk officers warn

In a new report, the chief risk officers united in the CRO Forum call on insurers to participate in a “massive and globally coordinated response” to mitigate climate risks, “enabled by radical economic and socio-cultural change”.

Like other recent publications, the CRO report warns about the serious physical, transition and liability risks which the changing climate creates for the insurance industry. It states clearly that “the carbon budget to achieve <2°C warming means that the majority of proven fossil fuel reserves may need to ‘be stranded’”, and warns that with higher temperature increases, insurance will become unaffordable for many people.

The CRO Forum advises that insurers can support climate mitigation, including the “phasing out” of fossil fuels, through their underwriting and investment activities: “Insurers can take more direct steps to curb global warming by disinvesting from sectors and/or businesses that are seen as heavily polluting. A number of prominent insurers have made public commitments to limit support and investment in carbon intensive industries.”

While the new report doesn’t mention coal exit policies specifically, it warns that “underwriting operations [with a high carbon footprint] will have to expect pressure from NGOs”. We will continue to document such pressure in this newsletter.

ZE PAK mines and plants (Poland) 

ZE PAK is a Polish coal miner and power generator which relies on lignite, the most polluting type of coal, almost exclusively. The company plans to develop up to three new open-pit mines holding more than 1 billion tons of lignite. Protests against ZE PAK’s operations have attracted thousands of people, and a protest targeting its insurers will take place on March 1.

ZE PAK’s mines and plants were insured in 2014 and again in 2016 by Allianz, Munich Re’s Ergo Hestia, Talanx’s Tuir Warta and Uniqa. Since then, Allianz has adopted a coal exit policy, Uniqa is in the process of doing so, and Munich Re will no longer underwrite stand-alone coal projects in industrialized countries. The ZE PAK contract will come up for renewal on April 1, 2019. All eyes are now on Talanx and its subsidiaries HDI and Tuir Warta.

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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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