Breakthrough: An assessment of the first US coal exit policy

How Chubb's coal exit policy stacks up

Chubb, one of the largest global property and casualty insurers in the power and energy sectors, deserves credit for being the first US insurer to adopt a coal exit policy – a historic breakthrough for the Insure Our Future and Unfriend Coal campaigns. The policy was welcomed by Rainforest Action Network, the Sierra Club and many other climate campaigners.

Al Gore, Mike Bloomberg and others have pointed out that other US insurers now have to follow suit in making coal uninsurable. The focus of attention has already shifted to Chubb’s peers Liberty Mutual and AIG.

Compared with existing policies, Chubb has made a strong commitment in that it will not underwrite new risks for companies that generate more than 30% percent of revenues from thermal coal mining and will phase out coverage of existing risks that exceed this threshold by 2022.

Chubb’s new policy also contains several exceptions which appear large enough to maintain coverage for too many coal (and tar sands) projects in the coming years. Campaigners have asked Chubb to address the following concerns:

. The policy allows insuring the construction of new and existing coal plants until 2022 “in regions that do not have practical near-term alternative energy sources” and “taking into account the insured’s commitments to reduce coal dependence”. Depending on how Chubb interprets this loophole, it will allow the insurance of hundreds of new plants in Southeast Asia.

. While the policy contains relatively strong language on coal mining companies, it does not seem to rule out insurance support for new stand-alone coal mines such as Australia’s Carmichael project - a concern Chubb urgently needs to clarify.

. Chubb will not underwrite new risks for companies that generate more than 30% of their energy production from coal and will phase out existing risks beyond this threshold after 2022. In doing so Chubb will however take into account “the viability of alternative energy sources in the impacted region”. This often depends more on distorted policies than economics, and Chubb should not hide its responsibility behind governance problems.

. Finally, unlike several of its European peers, Chubb is not ending insurance support for new tar sands projects and their developers.

Liberty Mutual won't touch Adani mine

In response to a petition by Rainforest Action Network, Liberty Mutual confirmed publicly that it will not offer insurance for the Adani Group’s giant proposed Carmichael coal mine project in Australia. The US insurer has however not yet agreed on a policy excluding coal and tar sands coverage overall.

In a media statement, the Adani Group on June 20 claimed to have secured insurance coverage for the Carmichael project. With Liberty Mutual, the Australian and most European insurers out of the picture, campaigners will now focus their attention on carriers like AIG, Berkshire Hathaway and the specialty insurers on the Lloyd’s market.

Zurich raises the bar on coal and tar sands

On June 25, Zurich Insurance Group announced a significant strengthening of its coal exit policy. Zurich is ending insurance coverage, after a two-year transition period, of all companies developing new coal projects or relying significantly on coal, tar sands and oil shale.

Zurich’s policy states the insurer will no longer underwrite or invest in companies that:

· generate more than 30% of their revenue from mining thermal coal, or produce more than 20 million tons of thermal coal per year;

· generate more than 30% of their electricity from coal;

· are in the process of developing any new coal mining or coal power infrastructure;

· generate at least 30% of their revenue directly from the extraction of oil from oil sands;

· are purpose-built (or “dedicated”) transportation infrastructure operators for oil sands products, including pipelines and railway transportation;

· generate more than 30% of their revenue from mining oil shale, or generate more than 30% of their electricity from oil shale.

Greenpeace Switzerland’s Asti Roesle welcomed the new provisions as “a groundbreaking move from one of the world's largest insurance companies” but warned that in case of companies still developing new coal projects, the exclusion policy should enter into force without any transition period.

ASR Nederland joins coal and tar sands exit club

ASR, a Dutch insurer with annual non-life premiums of €3 billion, in June adopted an expanded blacklist of 243 companies which it will neither insure nor hold in its investment portfolio. The blacklist includes companies depending on coal for more than 30% of their business, or on tar sands and oil shale for more than 33% of their revenues.

Moody's doesn't expect 'meaningful' losses for insurers excluding coal

“It is simply the right thing to do”, Zurich’s CEO Mario Greco commented as his company strengthened its coal exit policy on June 25. As it happens, doing the right thing for the climate should not result in a meaningful loss of business for insurers, according to a new report by Moody’s.

“While thermal coal is a relatively large sector, we do not expect large diversified insurers’ thermal coal exclusionary policies to result in a meaningful loss of business,” the report states. “These insurers could, in fact, benefit from reduced exposure to potential environmental liability risks associated with thermal coal industries.”

According to Business Insurance, Moody’s expects more insurers to follow suit as environmental, social and governance risks become more immediate, and as regulatory and public focus on them intensifies. “We are increasingly focused on the strategies insurers are adopting to manage the effects of climate change and demographic shifts, which we expect to become more material over time,” the new report states.

Insuring Coal No More

How Chubb's coal exit policy stacks up

Liberty Mutual won't touch Adani mine

Zurich raises the bar on coal and tar sands

ASR Nederland joins coal and tar sands exit club

Moody's doesn't expect 'meaningful' losses for insurers excluding coal