The insurance industry’s anti-coal stance will deliver significant long-term benefits despite potential short-term losses, according to data and analytics company GlobalData.
The statement comes as more insurers pledged to reduce their exposure to the thermal coal sector and force the energy industry to embrace renewables.
Read more: Zurich makes commitment to UN pledge to tackle climate change
“With climate change potentially causing the increased frequency of extreme weather events and rising sea levels, ceasing protection for fossil fuel-based energy providers may enable the industry to benefit from reduced exposure to potential environmental liability risks and enhance its public reputation,” said Daniel Pearce, insurance analyst at GlobalData.
AXA is extending its climate change policy to its recently acquired XL division, which means XL will no longer insure any construction projects related to coal-fired power plants and the extraction of tar sands. This move is expected to bring a $112.16 million loss in revenue, mainly in 2020. However, GlobalData said this will “undoubtedly improve public perception of an insurance industry.”
Read more: Chubb to stop covering coal - report
Other European insurers are also making their move, including Chubb which recently announced that it will no longer insure or invest in companies that operate coal-fired plants, or in firms which get more than 30% of their revenue from coal mining. According to insurance group Moody’s, similar action by a handful of providers has not brought meaningful loss of business.
“On the surface, distancing itself from coal may have a significantly negative impact on the insurance industry, given the loss of business,” Pearce said. “However, in addition to the possible progress in consumer perception, the industry may in fact enjoy a considerable financial benefit in the longer term as a result of any anti-coal stance.”
