Over 15 insurance providers with combined assets of $8.9 trillion and who make up almost 37 percent of the global insurance market have begun withdrawing their support for the coal industry. This follows 10 insurance firms withdrawing the coverage offered to coal companies and coal power plants operators in 2019, doubling the number of firms who had done so by the end of that year.
Context regarding reduced insurance for coal projects
Numerous insurance companies have gradually moved to end their support for the coal industry to align with the United Nation's Sustainable Development Goals (SDGs) and show their support for the Paris Agreement on climate. The rise in global temperatures and the increasing frequency of floods, wildfires, and hurricanes has led to claims rising across the international insurance sector. With coal, the single largest contributor to global carbon emissions, and by association climate change, the insurance industry along with numerous financial service providers have deemed the coal industry as unsustainable.
The insurance industry at large gradually ending its support of the coal industry will likely accelerate the decline of the global coal industry and the companies operating within it, as these companies will be unable to operate power plants and mines without insurance cover. Whatever future insurance policies coal plant operators can attain will likely be at prohibitive rates due to the lack of options available, which may increase operating costs for coal companies and miners, further reducing its competitiveness against renewables, and ultimately leading to future workforce downsizing.
As the coal industry declines and the growth of its power generation efforts ceases, renewable energy companies may receive more funding from investors. Insurance companies can also design new policies and coverage packages for the renewable energy industry, which industry players may see as the revenue source to replace past profits from the coal industry.
Implications of reduced insurance for coal projects
The implications of reduced insurance for coal projects may include:
- Existing coal companies having to insure themselves, increasing their operating costs.
- Coal companies, power operators, and miners closing down as banks and insurers refuse to finance new loans and provide insurance options.
- The renewable energy industry growing exponentially over the next 20 years as the investment previously directed towards coal transitions to supporting the renewable energy industry.
- Insurance companies increasing their expertise in renewable forms of power and the world benefitting from reduced carbon emissions.
Questions to comment on
- Do you think renewable energy such as wind and solar power can effectively serve the world's increasing energy demands if all forms of coal-driven power generation cease in the future?
- In addition to solar and wind energy, what other forms of energy could replace the energy supply gap if coal-generated power ceases to exist in the future?