The Swiss insurance company Chubb, a major insurer of the United States coal industry, announced a new policy Monday limiting coverage for coal companies.
Chubb will not sell new insurance policies to companies that build or run coal-fired power plants, or to companies that generate more than 30 percent of their revenue from coal mining or coal-fired electricity. The company also plans to phase out its existing investments and insurance policies for coal companies over the next three years.
"Chubb recognizes the reality of climate change and the substantial impact of human activity on our planet," Evan G. Greenberg, Chubb's chief executive officer, said in a statement. "Making the transition to a low-carbon economy involves planning and action by policymakers, investors, businesses and citizens alike. The policy we are implementing today reflects Chubb's commitment to do our part as a steward of the Earth."
But climate change is also a financial threat to insurers. As extreme weather events such as hurricanes, wildfires, and floods become more frequent and more severe, the cost to insurance companies rises. Last year, insured losses for natural disasters topped $76 billion—the fourth-highest amount on record—according to a report from the insurance company Swiss Re. The company estimates that economic losses from such disasters have averaged $180 billion a year over the last decade. It makes sense that insurers would want to protect against catastrophic financial losses by preventing future climate change.
"A 2°C world might be insurable," Henri de Castries, the former chief executive officer of the insurance company AXA, said in 2015. "A 4°C world certainly would not be."
Europe's four biggest insurers—Allianz, Generali, AXA, and Zurich—have already begun limiting coverage for coal companies, and a third of the reinsurance market (which insures insurers) has placed limits on coverage for coal. But this marks the first time that a United States insurer is ditching coal. As the European market has shrunk, climate advocates have called the U.S. insurance industry a lifeline for coal companies, which, without insurance options, would likely have to close down existing plants and cancel plans for new facilities.
Ross Hammond, a senior strategist for the Insure our Future campaign, which is focused on getting the insurance industry to divest from coal, called Chubb's decision a "game-changer," but noted that there is still room for improvement in the Swiss insurer's policy.
"Now the company needs to strengthen its policy to exclude new coal mines, fully phase out coal across all underwriting and investment activities in line with the Paris Agreement, and stop insuring the destructive tar sands sector," Hammond said in a statement.
Still, he took the opportunity to urge other U.S. insurers to follow suit. "Other U.S. insurers, like Liberty Mutual and AIG, must now join Chubb in acknowledging the role the U.S. insurance industry has to play in stopping climate change by ending their support for coal," Hammond wrote on Twitter.