A major international commercial insurance company has announced plans to move away from insuring and investing in coal. Chubb Ltd, which operates in 54 countries including the U.S., said it will no longer underwrite construction of new coal-fired power plants. Chubb also plans to stop investing in companies that generate more than 30 percent of their revenues from coal mining or production and to phase out existing coverage for companies that exceed that threshold.
The move makes Chubb the first major insurance company with operations in the U.S. to move away from coal. It’s good news for those concerned about climate change. Coal is the single largest contributor to global warming, yet it remains the world’s top source for electricity.
“Chubb recognizes the reality of climate change and the substantial impact of human activity on our planet,” Evan G. Greenberg, the company’s chairman and CEO, said in a statement. “The policy we are implementing today reflects Chubb’s commitment to do our part as a steward of the Earth.”
Insurance companies are in a unique position to make it increasingly difficult for coal-fired power to exist, as Unfriend Coal’s Insuring Coal No More report states.
“Without their coverage of the numerous natural, technical, commercial and political risks of coal projects, new coal mines and power plants could not be built and existing operations would have to shut down.”
Insurance companies also have an incentive to move away from coal. After all, climate change is increasing the frequency and intensity of natural disasters, which insurance companies have to cover. So, insurance companies can cut future costs by not covering or investing in coal.
“Chubb’s announcement is a clear sign that coal is becoming uninsurable worldwide,” Mary Anne Hitt, director of the Sierra Club’s Beyond Coal campaign, said in a statement. “With the U.S. industry joining this global trend, governments and power utilities should see that the industry is moving beyond coal.”
In Europe and Australia, about a dozen major insurance companies have taken similar actions to limit their coverage of coal companies.
Climate change could also raise costs of individual insurance plans, as Ernst Rauch, chief climatologist at the reinsurance company Munich Re, told The Guardian. “If the risk from wildfires, flooding, storms, or hail is increasing, then the only sustainable option we have is to adjust our risk prices accordingly. In the long run it might become a social issue,” he said. “Affordability is so critical [because] some people on low and average incomes in some regions will no longer be able to buy insurance.”