Property insurers are finding it increasingly difficult to provide property owners with affordable insurance in some locations due to the increased severity and frequency of severe weather events in recent years–everything from flooding to hurricanes, tornadoes and tsunamis. Given the risks insurance companies are exposed-to they are being viewed as a less-attractive and a higher risk investment than before, yet the Canada Pension Plan Investment Board (CPPIB) recently purchased part of the ailing U.S.-based giant AIG Canada, for $1.1 billion (U.S.).
An investment like the CPPIB’s in AIG Canada would likely not have been undertaken by financial institutions such as the Norwegian Pension Fund Global, the Dutch healthcare pension fund, or the French insurer AXA, who must all include climate risk as a factor in their investment decisions.
Canadian Underwriter.ca has prepared a paper entitled: “Premiums Likely to Rise as Insurers Forced to Pay Up for Massive Storms.”
According to their paper, “Home owners should prepare to pay more for property insurance as the severe weather trend that has battered the country during the past year is expected to continue.” Pete Karageorgos, manager of consumer and industry relations at the Insurance Bureau of Canada states: “There are more and more storms happening, and we’re seeing extreme weather events that happened once every 40 years…that can now be expected to happen once every 6 years.”Karageorgos went on to say: “Trends for the last few years have been that we’re seeing storms occur with greater regularity so the amount of claims that have been presented have been averaging about a billion dollars a year over the last three years or so.”
Intact Financial Corp., one of Canada’s largest property and casualty insurers, raised premiums by 15 to 20 per cent during the past few months as catastrophic losses and weather-related claims have risen. “From water to wind, the impacts of climate change coupled with urban growth, aging municipal infrastructure and the greater prevalence of finished basements are posing new challenges to the industry,” said Impact spokesman Gilles Gratton.
Catastrophic losses insured by Intact over the last three years represented between 10 per cent and 20 per cent of Intact’s total claims costs in personal property, Gratton added, noting that water damage, wind and hail claims now represent more than 50 per cent of the company’s insured losses in personal property.
According to the Insurance Bureau of Canada, the amount of insured damage resulting from extreme weather in Canada grew from less than $200 million in 2006 to $1.2 billion in 2012.
The entire paper can be found at:
In 2017 Les Amis de la Terre France (Friends of the Earth France), in a coalition with a number of other environmental groups under the banner “Unfriend Coal” issued a report entitled: “Insuring Coal No More: An Insurance Scorecard on Coal and Climate Change.”
In their Scorecard, Unfriend Coal stated that: “Coal is by far the biggest source of CO2 emissions. In its annual review of global action on climate change, the UN has just called for a stop on new coal power plants and an accelerated phase-out of existing plants as key steps towards achieving the goals of the Paris Agreement and limiting average temperature increases to well below 2 degrees Celsius. The International Energy Agency’s pathway for a 2 degree transition also requires 99% of global coal generation to be phased out by 2050.”
Insurance companies are increasingly pulling out of the coal sector in response to climate change. In 2015 the large French insurer AXA became the first global insurer to reduce investment. Now, fifteen insurers are collectively divesting about $20 billion from coal companies, and some are ceasing to underwrite coal. The Scorecard poses the question:
“Is coal becoming uninsurable?” The insurance companies are among the ultimate managers of risk in our society. With total assets under management of approximately $31 trillion, they are also one of the world’s largest groups of institutional investors. With their underwriting and investments they play a major role in shaping the world’s industrial development. Through their role as underwriters, insurers play an essential role for the continued construction and operation of coal projects. Without the coverage of their significant natural, commercial, legal and political risks, major coal mines, ports, and power plants could not be funded, built or operated.
Unfriend Coal goes to say: “Insurance companies have a vital self-interest in avoiding catastrophic climate change. 2017 is on track to become the worst climate disaster year for the insurance industry, and growing areas–for example exposed coastal properties–are becoming uninsurable. A representative from the British insurer Aviva says: “Left unchecked, climate change will render significant portions of the economy uninsurable, shrinking our addressable market.”
The Unfriend Coal campaign holds insurers to account for their action (or inaction) on coal and climate. In June 2017, a coalition of thirteen organizations engaged in the campaign asked twenty-five of the leading insurance companies around the world to stop underwriting coal, divest their assets from the coal sector, prepare longer-term plans to exit all fossil fuels, and scale up their support for clean energy solutions. By underwriting and investing in coal and other fossil fuel projects, insurance companies contribute to the kind of catastrophic climate change from which they are supposed to protect their customers.
Seventeen of the twenty-five insurance companies responded–a 68% participation rate. From their responses, and additional relevant information from industry surveys, company literature, and corporate websites, a scorecard was devised to assess how insurance companies are performing on coal and climate change.
To prepare their Scorecard, the Unfriend Coal campaigners asked the insurance companies to undertake the following actions by October 2017:
- “Develop and adopt publically available policies not to underwrite any new coal exploration, coal mining, coal power plant or coal infrastructure projects, and not to offer any insurance, including renewing existing policies, to companies that meet any one of the following criteria:
- they derive at least 30% of their revenues or power generation from coal;
- they produce, trade or consume at 20 million tons of coal annually;
- they plan investments in new coal mines, power plants or infrastructure.
Workers’ compensation policies, which directly benefit workers in the coal industry, should be exempt from this policy.”
- “Publically exclude offering any insurance coverage to the Adani group of companies and partner companies associated with the Carmichael coal mine in Australia, one of the world’s largest coal mining projects.”
- “Develop and adopt a publically available policy to divest, within six months, any assets from companies that meet any of the criteria above. They should divest such holdings from investments on their own accounts, and no longer offer respective holdings to external investors whose assets they manage.”
- “Beyond October 2017, develop a plan to divest from and cease underwriting other fossil fuel technologies (oil, gas and associated infrastructure) for their business to become fully compatible with the goals of the Paris Agreement.”
- “As they divest from coal and other fossil fuel projects, scale up investments in clean energy companies that follow international human rights and social and environmental standards in their projects, at a corresponding pace.”
The Unfriend Coal report scores the response of the twenty-five insurers to this appeal for action on coal and climate change.
The entire report can be found at: www.unfriendcoal.com