Coal Mining: Difficult To Finance Due To The Limitations Issued By Insurance Firms

Coal plant decommissioning

Coal plant decommissioning campaigns may be won or lost by cutting off insurance coverage.

Insurance firms have imposed limits on coal project underwriting, making it more difficult for big coal operators to get bank finance and investment for mines, transportation, and power plants. If not for insurance, their assets may have seemed to be excessively hazardous.  How to prepare for the United Nations climate conference and why it matters.  The Net Zero Insurance Alliance is directed by Thomas Buberl, CEO of Axa, a sizable French underwriting business. In an interview, he said that the objective was to have “all the insurers employing a technique to only cover enterprises that are headed toward climate transition and not to the dark ages of burning coal.

When you hear the phrase “corporate activism,” it’s because many company leaders are attempting to use their financial weight to accomplish what other activists have been unable to achieve via legislation or negotiation at events such as the COP26 climate conference next week in Glasgow, Scotland. Many campaigners who have had difficulty mobilizing governments are turning to the private sector for support.  Activist organization Insures Our Future claims that insurers are also vital investors on its platform. Insurance companies in the United States have invested $582 billion in fossil fuels, of which about 90 billion dollars are allocated to coal. “

While most European insurers have stopped or curtailed their coverage for coal projects, several of the most notable names in the U.S. insurance industry, like AIG, Berkshire Hathaway, and Travelers, haven’t done so. According to Buberl, Japan’s Tokio Marine, another giant insurer, has also continued business with fossil fuel industries.  According to an AIG assessment released in June 2021, “climate change is a difficult subject” and “the world cannot now satisfy its energy demands with only green solutions” are true. Insurance coverage for customers who are significant consumers or producers of fossil fuels shouldn’t suddenly be reduced or stopped since it wouldn’t be in the best interests of our stakeholders and the general public.

The coal industry is already suffering.

It’s no secret that banks, insurance firms, and huge investors are cutting down on or terminating their financial ties with fossil fuel-related businesses. As a result, coal companies have seen a decline in their liquidity and ability to operate.  

Our Future believes that coal businesses risk a 40 percent rise in their insurance premiums.  National Mining Association spokeswoman Ashley Burke said in an email. According to her, “you will understand why fuel targeting doesn’t work and why vilifying the fuels essential to keep the lights on is futile,” given Europe’s high gasoline costs.

The Net-Zero Insurance Alliance is putting pressure on insurers that have not joined. According to several analysts, coal assets might become “stranded,” meaning that they can no longer be put to good use before the market for their products shifts into a new period.

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In a letter dated March 24, Democratic Senators Sheldon Whitehouse of Rhode Island, Jeff Merkley of Oregon, Elizabeth Warren of Massachusetts, and Chris Van Hollen of Maryland urged Chubb CEO Evan Greenberg to limit coverage of coal businesses.  Activists then transported a 15-foot-tall Greenberg inflatable body, engulfed in flames, to the U.S. Open tennis event, which Chubb sponsored.  And in September, Chubb became the 16th insurer to withdraw its support for the Trans Mountain Pipeline, which transports crude and processed oil sand products from Alberta. Chubb has long rejected calls to reduce its insurance and investment in fossil fuels.

It’s not apparent how far Chubb is willing to go, but the insurer has already stopped purchasing new debt or equity investments in firms that get more than 30% of their income from thermal coal mining or coal energy generation. For enterprises that produce more than 30% of their income from coal output, Chubb no longer underwrites the development and operation of new coal-fired power facilities. According to the business, existing coal-fired power plants with emissions above this level will have their insurance coverage gradually phased out by 2022.

In addition, Axis Capital, on October 20, vowed to stop any insurance or reinsurance for new or existing coal or oil mines, oil extraction and pipeline projects in the Arctic, and Arctic oil and gas projects. For its part, the corporation declared it wouldn’t do business with companies earning more than 20% of its income from coal or oil & gas production.

Coal was banned from new investment by Axa Insurance, a worldwide insurance company, for the first time, in 2015. Dozens of additional insurers jumped on board within two years. Companies generating 60 and later 50 percent of their income from carbon-emitting businesses had been barred by Axa at first.

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