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Cooling towers of a coal-fired power plant. Photo: Federico Gambarini/picture alliance via Getty Images

Earlier this month, Chubb became the first U.S. insurance company to limit coal-related underwriting and investing, expanding a global trend that has seen 15 companies — underwriting a total of $313 million in premiums — announce new policy restrictions.

Why it matters: The proliferation of coal-exclusion policies at globally significant financial institutions — 113, according to the the Institute for Energy Economics and Financial Analysis — is leading large, diversified mining and utility companies to reduce their exposure to coal, and in some cases to exit the coal industry altogether, to avoid losing access to finance.

What's new: The policy from Chubb, the world’s largest publicly traded property and casualty insurer, will end new coverage for utilities and miners whose power generation or revenue is more than 30% derived from coal, in addition to phasing out existing relationships with such firms.

Background: Since rapid declines in coal power create risk for investors and insurance companies, higher costs of capital and rising premiums could become the “new normal.”

  • The Bank of England conducted stress tests on insurer portfolios and consistently found coal investments to have the highest transition risk.
  • According to California's voluntary disclosure database, the more than 1,000 insurance companies operating in the U.S. collectively hold over $131 billion in coal investments.
  • Willis Towers Watson projects companies that continue to invest in coal will find it harder to replace their coverage as more insurers leave the industry.

Between the lines: The strength of insurers' coal-exit policies varies widely. Chubb’s policy, for example, allows exceptions until 2022 and would not impact large diversified miners like Glencore, whose coal dependence falls below the threshold.

  • Per a scorecard by a group of NGOs, some divestment policies define coal companies too narrowly to include many leading developers, while others exempt certain types of insurance or projects as well as assets managed for third parties.
  • While divestment policies will raise premiums for utilities like RWE, AEP and Ameren, loopholes could end up dampening the effects. Even still, however, companies unaffected by the policies, like BHP, are planning coal exits in response to investor pressure.

What to watch: Based on a Moody's forecast that coal could fall to 11% of the U.S. power supply by 2030, it will be easier for insurers to implement coal restrictions without hurting their bottom lines. More policies like Chubb's may soon be on the way.

Justin Guay directs global climate strategy at the Sunrise Project and advises the ClimateWorks Foundation.

Go deeper

Updated 1 hour ago - World

Pentagon: 8,500 troops on high alert for possible deployment to eastern Europe

Photo: Anna Moneymaker/Getty Images

Defense Secretary Lloyd Austin has placed 8,500 U.S. troops on "heightened preparedness to deploy" to eastern Europe in case NATO activates its rapid-response force over tensions with Russia, the Pentagon announced Monday.

Why it matters: No decisions have been made to deploy U.S. forces, but the heightened alert level will allow the military to rapidly shore up NATO's eastern flank in the event that Russia invades Ukraine. The Pentagon warned that Russia has shown "no signs of de-escalating," and continues to amass troops on Ukraine's borders.

Alabama's new congressional map rejected by federal judges

The Alabama State Capitol in Montgomery. Photo: Taylor Hill/Getty Images

Federal judges on Monday night blocked Alabama's newly drawn congressional map and ordered the Republican-led State Legislature to create a new one that includes two districts, rather than the planned one.

Why it matters: "Black voters have less opportunity than other Alabamians to elect candidates of their choice to Congress," the panel of three judges wrote in their ruling.

Australian Open organizers reverse "Where is Peng Shuai?" t-shirt ban

Chinese tennis player Peng Shuai during the 2020 Australian Open in Melbourne. Photo: Bai Xue/Xinhua via Getty Images

Australian Open organizers on Tuesday reversed a ban on t-shirts supporting Chinese tennis player Peng Shuai following widespread criticism.

Why it matters: Tennis Australia's announcement came less than 24 hours after the governing body defended the decision to ask fans last Friday to remove "Where is Peng Shuai?" t-shirts, citing ticket policy prohibiting political clothing, per the BBC.