The Conversation [theconversation.com]
The announcement by Suncorp [theguardian.com] that it will no longer insure new thermal coal projects, along with a similar announcement by QBE Insurance [insurancenews.com.au] a few months earlier, brings Australia into line with Europe where most major insurers [insureourfuture.us] have broken with coal.
US firms have been a little slower to move, but Chubb announced [reuters.com] a divestment policy in July, and Liberty has confirmed [ran.org] it will not insure Australia’s Adani project [wikipedia.org].
Other big firms such as America’s AIG are coming under increasing pressure. [sumofus.org]
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. [theconversation.com]
But without insurance, mines can’t operate. (Adani claims to have insurers for the Carmichael project, but has declined to reveal their names [ecowarriorprincess.net].)
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.
…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.