As hurricane Maria bears down on the Caribbean while communities are still counting the cost of hurricanes Irma and Harvey, it’s clear that insurance companies are profiting twice from our self-destructive race to the bottom on climate change. While it will be news to almost no-one that the insurance industry performs some fairly energetic mathematical gymnastics when deciding how to calculate risk, insuring against the risks of climate change while also underwriting some of its causes must require mental twists of which an Olympic medal-winner would be envious.
Most of us have known the heartsink moment when our car or bike premium shoots up in a way we don’t understand, and cannot really afford. For some, getting any kind of insurance is impossible, all too often for reasons that are likely discriminatory. But often in those moments, the insurance industry projects an image that suggests its corporations have a better grasp of how risk works than the rest of us. Insurance companies profit not just because they play the odds, we are encouraged to assume, but because they know how to understand and navigate the odds in a way most of us cannot.
A closer look reveals that when it comes to climate change, however, the opposite may very well be true. The industry has insured against the risks of climate change for decades now: its profit margins depend upon it being on the leading edge of developing insight into exactly these sorts of major threats. But at the same time, is has been blithely underwriting the sort of huge coal projects that are sending global temperatures spinning towards a catastrophic increase of more than two degrees centigrade. It underwrites coal-fired power stations, tar sands projects, and huge pipelines: all projects that would not be viable without the services provided by insurance companies. The left hand of the insurance industry doesn’t seem to know what the right hand is doing - or more likely, doesn’t much care. And so, from both the premiums of the people looking to offset the risk of dangerous climate change, and from the industries helping to accelerate it, heads, they win, tails, we lose.
The insurance companies’ glory days of a double profit bump from climate change might be numbered, however. The Unfriend Coal campaign aims to end insurance companies’ profiting from a global catastrophe they have played an instrumental role in creating. As the insurance industry meets for its annual conference in Monte Carlo, the campaign is calling on the industry to stop underwriting coal projects, and to divest their funds from coal companies. It also demands that the same corporations develop plans for how to move away from other fossil fuels and increase their investment in clean energy sources.
It is true that coal is not the only source of energy that aggravates the threat of dangerous climate change. It is, however, the most significant cause. Detailed research published last year indicated that without phasing out coal extremely rapidly, there would be no chance of getting anywhere close to meeting the targets in the Paris climate agreement. Not only does that mean no support for new coal projects, it means winding down existing coal-fired power plants, in many cases before the end of their “natural” life. Tackling our reliance on coal will not avert the climate crisis, but it can buy us the time we so desperately need to identify the long-term solutions to our energy addiction.
Insurance companies have been enthusiastic supporters of the Paris Agreement. Only last year the Insurance Development Forum, an international coalition of insurers, the United Nations and the World Bank, said it would provide a better insurance offer to countries at the sharp end of climate change, facing the dual threat of widespread poverty and rapidly worsening climate change impacts from extreme weather and food and water insecurity. But such initiatives are bordering on insulting to the nations they claim to help if they sit alongside a corporate culture that cheerfully profits from creating the conditions leading to these dire circumstances in the first place.
There are some positive signs that insurers might be starting to clean up their act. In April, the huge French insurance company AXA said that it would no longer provide underwriting to companies that made more than 50% of their turnover from coal. Reinsurer SCOR has just announced that it has no more direct investments in companies getting more than 30% of their turnover from thermal coal, and has pledged to avoid similar investments in the future. This brings SCOR in line with its peers Allianz and Swiss Re. AXA and Munich Re, which still invest in companies deriving up to half their revenue from coal, should follow suit.
There will almost certainly be reputational and long-term profitability boosts to the insurers that move first in a progressive direction. Those that go the extra mile by backing projects that replace the lost energy capacity and employment from the shift away from coal can expect even greater gains. Meanwhile, the laggards can expect a worsening reputation amongst the public and growing pressure from campaigns like ours that will increasingly disrupt their ability to pursue “business as usual” in the face of an existential threat to our communities and our planet.