Is Climate Change Real? Ask the Insurance Companies Paying for It
Climate change… Two words that are sure to spark lively discussions the world over.
While President Trump may not believe it’s real, recent surveys suggest an overwhelming majority of Americans do.
Even 32% of conservative Republicans think it’s real.
That’s up from just 14% five years ago!
A major side effect of climate change has been an uptick in the number of natural disasters.
In fact, catastrophic losses from disasters (like flooding, hurricanes and wildfires) are set to triple over the next 30 years.
In 2018, these disasters cost insurance companies $160 billion in losses.
With more disasters on the horizon, the insurance losses could cause a global financial meltdown.
And yet the same insurance companies continue to protect one of the leading causes of climate change: coal-fired power plants.
For years, U.S. insurers have ignored potential liabilities from coal. But the growing financial impact of damages from climate change is starting to hit home.
US vs. Them
Coal-fired power plants currently contribute 44% of energy-related carbon dioxide emissions.
Today there are almost 800 new plants in either the planning or construction stages.
But without insurance, none of them would move forward.
Sounds like an easy call for insurers to make…
They can avoid financial ruin by not insuring the biggest contributor to climate change.
Not to mention, the whole concept is cyclical and nonsensical.
By protecting the coal industry, U.S. insurance companies are accelerating the very damages they insure against.
Outside the U.S., insurance companies are quickly coming to grips with the liability that climate change represents. Most of the leading European insurers have taken action against coal.
But American insurers have remained frustratingly mum on the subject.
Federal law says insurance companies aren’t required to disclose what they insure or how much of their premiums come from insuring coal-fired power plants.
Once again, California is leading the way in energy reform.
California is the country’s biggest insurance market. It’s also the third-largest in the world.
In 2016, it passed legislation requiring any insurance company that writes more than $100 million in premiums to disclose its fossil fuel investments.
Now five other states – Connecticut, Minnesota, New Mexico, New York and Washington – are requiring insurance companies operating within their borders to disclose their fossil fuel premiums.
So why would U.S. insurers continue to underwrite and make investments in coal-fired power plants?
As always, it comes down to money.
Back Out Now
Let me give you an example to illustrate how ridiculous this situation is.
As homeowners, we all carry fire insurance to protect our investment. But imagine that the company you buy your fire insurance from also insures teams of arsonists.
Would you continue to buy your insurance from them? Of course not.
What U.S. insurance companies are doing with coal-fired plants is no different.
It’s time for U.S. insurers to step up to the plate and start distancing themselves from coal.
Otherwise, they are going to be facing huge liabilities.
Investors who own shares of these insurers might want to consider putting their money elsewhere.
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