A handful of reinsurers have the power to hasten the phase-out of coal and play an important role in the fight against climate change, but weak industry policies are undermining action taken by direct insurers, reveals a briefing from the Unfriend Coal campaign released on 11 September to coincide with a major industry conference.
A growing number of major direct insurers, including AXA and Allianz, are backing international efforts to combat climate change by withdrawing cover and investment from coal projects, but the response from the reinsurance industry has been far weaker, finds Reinsuring Climate Chaos, which analyses the coal policies of five companies controlling nearly half the global reinsurance market.
Reinsurers are increasingly important in allowing the coal sector to continue to expand. As major companies stop insuring coal smaller players will likely be approached to fill the gap. However, smaller companies will need higher levels of reinsurance to offset the legal, financial and natural risks of coal projects, which can run into billions of dollars. Without access to reinsurance, these companies may not be able to offer cover.
The UN recently called for a stop to all new coal plants and an accelerated phase-out of existing plants as a key step to meeting the Paris climate target of limiting global warming below 2°C and as close to 1.5°C as possible. However, more than 630 GW of new coal capacity is currently in planning or under construction.