U.S. insurance industry under growing pressure to exit fossil fuels
A Keystone pumping station in North Dakota for tar sands crude oil. Photo: Lucas Oleniuk/Toronto Star via Getty Images
A new policy from AXIS Capital will restrict insurance and investing in coal and tar sands, heightening pressure on other U.S. insurers to take similar moves.
The big picture: All major European insurers, with the exception of Lloyd's, have announced comparable policies. U.S. insurers had been bucking the trend until Chubb stepped forward in July, but AXIS' decision adds momentum to the shift away from not just coal but fossil fuels more broadly.
Driving the news: Under the policy, AXIS will stop insuring and investing in tar sands extraction, pipeline projects and their dedicated infrastructure, in addition to restricting coverage of new coal-fired power plants, coal mines and coal companies.
- As a global firm with 19 subsidiaries, AXIS serves more than 200 territories and countries. It is an important specialty insurer and key player on the Lloyd’s Market, with $24.1 billion in total assets and $6.4 billion in total capital.
Context: In 2018, AXIS endured significant losses from global weather-related events, including pre-tax losses of $125 million to $150 million from California wildfires.
- Globally, 17 insurers across three continents have adopted policies restricting coal insurance and four have restricted tar sands insurance. More than half of those policies were adopted in 2019.
Yes, but: Consequential as the policy is, it does have loopholes that limit its impact.
- An exemption for insuring new projects in "countries where sufficient access to alternative energy sources is not available" could allow AXIS to insure hundreds of new plants through 2024 in South and Southeast Asia, where the majority of the currently proposed coal-fired power plants would be built.
- AXIS provides a long transition period for existing clients, as contract renewals will be considered on a case-by-case basis until 2023.
What to watch: Now that Chubb and AXIS have implemented these policies, Liberty Mutual and AIG will be closely watched for announcements of their own.
Justin Guay directs global climate strategy at the Sunrise Project and advises the ClimateWorks Foundation.