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[Emphasis is from original. --Ed.]
The announcement by Suncorp that it will no longer insure new thermal coal projects, along with a similar announcement by QBE Insurance a few months earlier, brings Australia into line with Europe where most major insurers have broken with coal.
US firms have been a little slower to move, but Chubb announced a divestment policy in July, and Liberty has confirmed it will not insure Australia's Adani project.
Other big firms such as America's AIG are coming under increasing pressure.
Even more than divestment of coal shares by banks and managed funds, the withdrawal of insurance has the potential to make coal mining and coal-fired power generation businesses unsustainable.
As the chairman and founder of Adani Group, Gautam Adani, has shown in Queensland's Galilee Basin, a sufficiently rich developer can use its own resources to finance a coal mine that banks won't touch.
But without insurance, mines can't operate.
(Adani claims to have insurers for the Carmichael project, but has declined to reveal their names.)
Why are insurers abandoning coal?
By the nature of their business, insurers cannot afford to indulge the denialist fantasies still popular in some sectors of industry. Damage caused by climate disasters is one of their biggest expenses, and insurers are fully aware that that damage is set to rise over time.
It's becoming easier to finger climate culprits...
Until recently, the most immediate problem facing potential litigants has been demonstrating that an event was the result of climate change as opposed to something else, such as random fluctuations in climatic conditions.
[...] The Bulletin of the American Meteorological Society has highlighted three extremes in 2016 that would not have occurred if not for the added influence of climate change:
[...] ...and to allocate liability
The second line of defence against climate litigation that has held so far is the difficulty of imputing damage to the companies that burn fossil fuels.
While it is true that all weather events have multiple causes, in many circumstances climate change caused by the burning of fossil fuels has been a necessary condition for those events to take place.
Courts routinely use arguments about necessary conditions to determine liability.
For example, a spark from a power line might cause a bushfire on a hot, dry, windy day, but would be harmless on a wet cold day. That can be enough to establish liability on the part of the company that operates the power line.
These issues are playing out in California, where devastating fires in 2017 caused damage estimated at US$30 billion and drove the biggest of the power companies, PG&E, into bankruptcy.
[...] When governments are successfully sued...
The remaining line of defence for companies responsible for emissions is the history of courts in attributing climate change to decisions by governments rather than corporations.
In the Netherlands, a citizen action group called Urgenda has won a case against the Dutch government arguing it has breached its legal duty of care by not taking appropriate steps to significantly restrain greenhouse gas emissions and prevent damage from climate change.
The government is appealing, but it has lost every legal round so far. Sooner or later, this kind of litigation will be successful. Then, governments will look for another party that can be sued instead of them.
...they'll look for someone else to blame
Insurance companies are an easy target with deep pockets. Despite its hopeful talk quoted above, AIG would find it very difficult to avoid paying up if Californian courts found the firms it insured liable for their contributions to a climate-related wildfires or floods.
This is not a message coal-friendly governments in the US or Australia want to hear.
But the decision of Suncorp to dump coal, just a couple of months after the re-election of the Morrison government, makes it clear that businesses with a time horizon measured in decades cannot afford wishful thinking. They need to protect themselves against what they can see coming.
(Score: 3, Interesting) by istartedi on Tuesday August 13 2019, @08:15PM (3 children)
Home-owners policies exclude things like earthquakes and floods. Why can't the insurance companies write policies that exclude climate impact? Even if they couldn't, policies have some kind of payout limit, right? So how can a plant be "Completely Uninsurable". It doesn't pass the smell test. I think maybe the insurance companies simply value the good will of "not supporting coal".
Appended to the end of comments you post. Max: 120 chars.
(Score: 3, Insightful) by AthanasiusKircher on Tuesday August 13 2019, @10:25PM (2 children)
I don't think you're getting the rationale here. I admit I wasn't certain about it when I first heard about it.
Basically, what the insurance companies are saying is: we are experiencing HUGE losses due to climate change, because we're needing to pay out MASSIVE amounts from natural disasters (flooding, hurricanes, extreme heat causing wildfires, etc.). The extreme events are unforeseen by actuaries who originally calculated the risk based on historical trends, but when huge areas flood that never flooded before due to storms unlike anything ever seen before, the insurance market can't keep up and ends up paying out huge numbers of claims that they never expected to. Many insurance companies are gradually modifying policies to eliminate flood coverage in many areas (or require significant extra premiums), but weather is becoming unpredictable enough that the actuaries can't keep up with reasonable predictions and thus the companies end up with surprises and sudden payouts (which make insurance unsustainable in such areas).
Coal plants and coal producers (like mines) are some of the worst offenders in producing greenhouse gases (which are the cause of climate change), and therefore a contributing cause of our huge losses. (Follow some of the links in TFA if you want to read about the magnitude of recent payouts due to more extreme weather events.)
Therefore, we will refuse to insure coal plants, because the coal plants are actively doing stuff that is ruining our business longterm.
The problem isn't insuring the plants themselves -- it's insuring all the other stuff that's getting ruined because of them.
Perhaps. But the entire insurance industry? I can imagine some insurance companies wanting to look good, but why wouldn't some unscrupulous company jump in and charge a huge premium then? They want to make money.
Unless their actuaries are actually right. Insurance actuaries are the people who really can't BS statistics, since their entire industry depends on accurate predictions. If weather events that used to be extreme outliers no longer are, "insurance" as a concept becomes unsustainable.
(Score: 2) by AthanasiusKircher on Tuesday August 13 2019, @10:33PM (1 child)
(Important qualification: At the beginning of my post, when I said "huge losses," I meant unexpected losses in certain geographical areas. I don't know how many insurance companies are actually losing money overall. But they are making lots of unexpected payouts, which impacts their expected returns and profits. If the actuaries tell the management and the stockholders that they'll be getting smaller bonuses because of that, the company might take action to mitigate such effects. Insurance is a generally a long-term business: they need to care about risk decades in the future to reliably price policies and to manage the portfolio of income they get by writing policies. If they can't make accurate predictions, they can't make a profit.)
(Score: 0) by Anonymous Coward on Wednesday August 14 2019, @04:02AM
According to the figures I found, in some areas the average loss ratio is 86% and reinsurance rates are climbing as well. In addition, the unhealthy range starts at 60% because the expense ratio averages somewhere in the mid-30s. That would mean at a loss ratio of 85 with an expense ratio of 35, their total loss is 120%, or they lose 20 cents for every premium dollar brought in if they don't have a reinsurance payout to offset.