Why the insurance industry must stop supporting fossil fuels

The original version of this op-ed by Kevin McComber can be found at PropertyCasualty360.com.

From 2015 to 2018, I worked as a project manager and then as a management consultant at a top 10 global P&C carrier. My employer operated out of LEED-certified buildings and gleaming facilities. But Styrofoam® was the norm in the office cafeteria, and the trash bins were literally overflowing after the lunchtime rush. I started an internal employee interest group to advocate for more sustainable operations, and we were generally met with nodding heads and positive action.

Once the obvious operational issues were addressed, we moved onto larger topics: investing and underwriting of fossil fuels. That is where we finally realized the magnitude of the positive impact our employer could have on the world, while dramatically improving the company’s future profitability prospects.

I would like to tell you more about what we discovered, and what spurred us to advocate for urgent change.

Fossil fuels and extreme weather

The insurance industry is seeing record-breaking losses from the extreme weather events that are intensified by a warming planet. Paradoxically, the industry is simultaneously fueling climate change by underwriting and investing in the dirty energy projects and companies that are at the root of the crisis: coal mines, tar sands pipelines, and oil and gas drilling.

Climate change by  the numbers

  • Global catastrophes resulted in $56 billion in insured losses in 2019, $155 billion in 2018, and a record $350 billion in 2017.

  • U.S. insurers have $450 billion invested in fossil fuels. Many underwrite the expansion of coal, oil, and gas.

  • New coal plants are planned in 60 countries; if built, these projects will add over 579 GW to the global coal plant fleet.

  • 19 insurers have adopted policies restricting coal underwriting, 25-plus insurers have adopted policies on coal investing. 5 insurers have adopted policies on tar sands underwriting, and 9 on investing.

  • 47.6% of the non-life reinsurance market has adopted coal restriction policies; coal companies and brokers are commenting that insurance is becoming more costly and challenging to secure.

This year, for the first time, the World Economic Forum’s 2020 report found that the top five global threats are all related to climate change. This is with good reason: 2019 marked the end of the hottest decade in recorded history, and scientists continue to tell us that we are running out of time to avoid the most catastrophic impacts. The breadth and depth of the crisis demands fundamental shifts from every corner of the global economy.

Steps in the right direction

The good news is that insurance companies are in a position to lead the business world in the right direction.

Some insurers are starting to acknowledge this responsibility. Following the movement of European and Australian peers, four U.S. insurers adopted policies restricting coal underwriting in the last six months of 2019: Chubb, AXIS Capital, Liberty Mutual and The Hartford. The shift away from coal is accelerating, with more than half of the 19 policies to date adopted in 2019. AXIS Capital and The Hartford also have limited tar sands business, alongside three European insurers.

This is a start for the industry. But given the size and urgency of the crisis, we are facing, much bolder action is needed. Three of the U.S. insurers have huge loopholes for new coal projects. To truly tackle the climate crisis at scale, the insurance industry must adopt clear plans to align all of their business with 1.5º C. That starts with not supporting the build-out of new coal, oil or gas projects and fully phasing out coal and tar sands business.

Furthermore, the entire industry must act, not just a handful of companies. AIG, for example, is a top global coal insurer and one of the few remaining companies that can take the lead in underwriting multi-billion-dollar coal projects. At the annual World Economic Forum meeting in Davos earlier this year, AIG CEO Brian Duperreault confirmed that AIG will continue to offer insurance for the coal industry. This undermines the progress others in the industry have made.

While 2019 was the second hottest year on record, it was also a year of mass action against climate change. Millions of people took to the streets, demanding urgent and bold action to tackle the climate crisis. And the U.S. climate movement is increasingly seeing the connection between insurers and the fossil fuel economyEarly this year, more than 30 organizations and movements started a new campaign under the motto Stop the Money Pipeline, which will push the finance industry to “stop funding, insuring, and investing in climate destruction.”

The reputational risk companies will face for continuing to do business with fossil fuels needs to be taken into account. Liberty Mutual has been the subject of protests at their offices, demonstrators have been showing up at meetings of the National Association of Insurance Commissioners, and the young people that the industry needs to bring into the workforce want to work for companies that are actively fighting the climate crisis. I believe insurers will increasingly struggle to attract and retain qualified talent if they continue to support activities that exacerbate climate change.

A call to action

I urge everyone in the insurance industry to address the risks that climate change poses and the responsibility of insurers to decarbonize.

It’s time for U.S. insurers to catch up with global efforts to tackle the crisis. There are no more excuses.


Kevin McComber (kmccomber@sparkphotonics.com) holds a PhD in materials science and engineering from MIT. He has worked in insurance, technology, and academia. He currently runs Spark Photonics, a company focused on promoting integrated photonics technology in order to achieve lower-energy data communications, among other benefits. These opinions are the author’s own.