The insurance industry as a leverage point for fighting climate change

One of the revelations about fighting climate change that seems to have echoed broadly since 350.org started the fossil fuel divestment movement is the degree to which the industry can be suppressed by denying it access to financial services.

That includes denying it the ability to borrow from banks and institutional investors, who are increasingly concerned both about the reputational risk of supporting a world-wrecking industry and the financial risk of contributing to new fossil fuel projects which will need to be shut down to avoid worst-case climate change scenarios.

It also includes the insurance industry. To begin with, they face enormous financial risks from climate change impacts as diverse as rising sea levels, extreme storms, and wildfires. The concept of insurance is that the premiums are reasonable because things won’t go wrong for everyone at the same time; you can get affordable fire insurance, for instance, because in most cases the insurer can be confident that only a small fraction of insured properties will burn each year. That calculation changes when climate change coordinates risks for billions around the world, whether that’s coastal property at risk to rising seas and hurricanes or towns in wildfire zones that now face an existential risk every time there is a bad fire season. With those kinds of risks now evident, it’s unsurprising that the insurance industry is expressing concern and calling for action.

In addition to those insured against climate change risks, insurance is also necessary for fossil fuel project proponents. That leverage point is being made use of by anti-pipeline activists in B.C. who are pushing for insurers to refuse to cover the Trans Mountain pipeline:

Over the course of the week, Indigenous rights and climate activists from Vancouver to Kiribati to Sierra Leone called on Liberty Mutual, Chubb, AIG, W.R. Berkley, Lloyd’s of London, Starr, Stewart Specialty Risk Underwriting, and Marsh to publicly pledge to refrain from doing any future business with the project.

…

Argo, one of the companies that currently insures Trans Mountain, recently confirmed it will not cover the pipeline or its expansion project, which would carry an extra 590,000 barrels of oil a day from the Alberta oilsands to British Columbia. Since then, two other insurance companies that had previously insured Trans Mountain but are not current insurers, Scor and Lancashire, have cut ties too.

No doubt this will lead to howls from pro-fossil entities, but in the long run blocking these projects has the promise of avoiding massive further investment in unusable energy.

The fossil fuel industry has been able to impose as much harm on the world as it has because there haven’t been mechanisms to make it care about the losses being suffered by others. If that freeloading dynamic changes, the world will have a better chance of avoiding climate catastrophe. Insurers can play an important role in driving the shift.

22 thoughts on “The insurance industry as a leverage point for fighting climate change”

  3. Nearly two dozen environmental and Indigenous organizations have signed an open letter calling on Trans Mountain insurers to drop the pipeline, warning the CEOs of major insurance companies that pressure will continue to mount until they do.

    The letter urges the companies to rule out insuring Trans Mountain, as well as any expansion project for the oilsands, and for the insurance companies to require its clients to obtain free, prior, and informed consent from impacted communities.

    It was directed to the CEOs of AIG, Chubb, Energy Insurance Limited, Liberty Mutual, and Lloyd’s of London syndicates, among others.

    https://www.nationalobserver.com/2021/09/03/news/climate-groups-warn-trans-mountain-insurers

  13. TORONTO – A shareholder advocacy group is calling out Canada’s property insurers for their support of the fossil fuel industry while also raising premiums because of climate-related disasters.

    Investors for Paris Compliance says in a report out Wednesday that the seven largest Canadian property and casualty insurance companies collectively invested about $19.5 billion in oil and gas assets last year, with almost three-quarters of that represented by Toronto-Dominion Bank, while some companies also did underwriting for the fossil fuel industry.

    At the same time, the property and casualty (P&C) insurance industry has raised home and mortgage insurance rates by 73 per cent in the 10 years leading up to 2023, or 36 per cent when adjusted for inflation, based on data from Statistics Canada.

    “The P&C industry is really entrenched in a contradiction,” said Kiera Taylor, senior analyst at Investors for Paris.

    “While their business faces an existential threat due to climate change via higher claims and growing uninsurability, they continue to foster those risks via underwriting and investing in fossil fuels.”

    https://www.ctvnews.ca/climate-and-environment/insurers-called-out-for-contradiction-supporting-oil-and-gas-industry-but-raising-premiums-1.6957887

  16. This could be the beginning of the end for fire insurance in California
    The damages could overwhelm the state’s already-stressed insurer of last resort.
    https://www.politico.com/news/2025/01/08/los-angeles-fires-insurance-california-00197196
    …
    But California faces a double-barreled threat: Private insurers could continue to drop policies and decline to write new ones, as they’ve been increasingly doing since a series of severe fires beginning in 2017 with the Tubbs Fire in Northern California. And the FAIR plan, which has been absorbing the shrinking private market, could run out of money to pay its claims.

    That wouldn’t mean going bankrupt, as McLean noted. Instead, it would draw from primary insurers to recoup its costs under state law, raising rates across all private policies and sending rates skyrocketing across the state.

    “This is sort of what everybody’s been preparing for,” said Karl Susman, an insurance broker in West Los Angeles who’s filing dozens of claims on behalf of clients. “This is why rates are going up. This is why carriers are freaking out.”

  17. It also spells trouble for the insurance industry, which was already in crisis.
    Homeowners in the US with mortgages are typically required by banks to have property insurance.
    But companies have been hiking prices – or cancelling coverage altogether – in the face of increasing risks of natural disaster such as fires, floods and hurricanes.

    As companies stop offering coverage, people are turning in surging numbers to home insurance plans offered by state governments, which are typically more expensive while offering less protection.
    In California, the number of policies offered through the state’s Fair plan has more than doubled since 2020, from about 200,000 to more than 450,000 in September of last year.

    Areas hit by the fires rank as some of the places with highest take-up, according to data from the programme, which was already warning of risks to its financial stability.

    Denise Rappmund, a senior analyst at Moody’s Ratings, said the fires would have “widespread, negative impacts for the state’s broader insurance market”.

    “Increased recovery costs will likely drive up premiums and may reduce property insurance availability,” she said, adding that the state was also facing potential long-term damage to property values and strain to public finances.

    LA wildfires among costliest in US history

    https://www.bbc.com/news/articles/c07g73p4805o

  18. Defended in 1993 by the largest army of firefighters in American history, wealthy Malibu homeowners benefited as well from an extraordinary range of insurance, land use, and disaster relief subsidies. Yet, as most experts will readily concede, periodic firestorms of this magnitude are inevitable as long as residential development is tolerated in the fire ecology of the Santa Monicas.

    https://longreads.com/2018/12/04/the-case-for-letting-malibu-burn/

  19. “Ultimately the 1956 fire—followed by two blazes, one month apart, in 1958–59 that severely burned eight firefighters and destroyed another hundred homes—proved the beginning of the end for bohemian Malibu. A perverse law of the new fire regime was that fire now stimulated both development and upward social succession. By declaring Malibu a federal disaster area and offering blaze victims tax relief as well as preferential low-interest loans, the Eisenhower administration established a precedent for the public subsidization of firebelt suburbs. Each new conflagration would be punctually followed by reconstruction on a larger and even more exclusive scale as land use regulations and sometimes even the fire code were relaxed to accommodate fire “victims.” As a result, renters and modest homeowners were displaced from areas like Broad Beach, Paradise Cove, and Point Dume by wealthy pyrophiles encouraged by artificially cheap fire insurance, socialized disaster relief, and an expansive public commitment to “defend Malibu.””

  22. SACRAMENTO, California — The rising cost of fire insurance was a problem in California’s rural fire-prone areas. Then it was a problem for suburban and urban fire-prone areas. Now it’s a problem for everyone.

    Nearly all Californians could see a surcharge on their property insurance bills to cover part of the industry’s losses from the Los Angeles fires after the state’s insurer of last resort said Tuesday it would run out of money to pay its claims.

    It’s the first time ever such a surcharge, which Floridians already know as a “hurricane tax,” will hit Californians, and represents a new frontier for the state: The cost of natural disasters — supercharged at least in part by climate change — is now directly hitting everyone’s pocketbooks.

    “This is a historic moment,” said Dave Jones, who was California’s insurance commissioner from 2011 to 2018. “It’s going to come as a rude shock to a lot of Californians.”

    https://www.politico.com/news/2025/02/13/california-fire-insurance-price-increases-00203993

Leave a Reply

Your email address will not be published. Required fields are marked *