Coal mines and power stations are becoming increasingly difficult to insure, research from Willis Towers Watson has shown, as climate change campaigners vow to make the commodity “uninsurable”.
European (re)insurers, including Axa XL, Scor, Allianz, Munich Re and Generali, have stopped underwriting individual coal projects due to concerns over climate change.
The broker’s 2019 Power and Renewable Energy Market Review found that the withdrawal of European capacity from the coal market could lead to price rises for smaller operators.
Willis noted in the report: “Ultimately, while sufficient capacity remains to insure standalone coal clients, these [smaller] clients have less leverage with the insurance marketplace, given the limited choices available.”
Some carriers have said they will carry on underwriting coal assets if they comprise less than 30 percent of a company’s assets.
Willis said power generation companies that operate diversified portfolios of power stations and renewable plants are likely to fall within the threshold for carriers to insure their remaining coal assets.
It is smaller coal operators that face the biggest rate rises. The Willis report noted that “even if they can find sufficient insurance capacity for their needs, the unavailability of most of the major European carriers is likely to mean that their insurance will cost more than it would otherwise have done”.
Willis said buyers would be forced to use insurers which would otherwise have been uncompetitive.
The Unfriend Coal campaign has been calling on insurers to withdraw their cover for coal-based projects as part of efforts to curb climate change.
Unfriend Coal coordinator Peter Bosshard said: “Capacity is contracting, which makes coal less competitive than renewables.
“Coal is on its way to becoming uninsurable,” he added.
Bosshard said the campaign was now focusing on US carriers and insurance brokers. AIG, Aegis, Liberty Mutual, Aspen and Berkshire Hathaway all offer cover for coal mines and power plants, according to Willis.
“We are starting the campaign in the US. These insurers need to become toxic for investors, consumers and prospective employees. We are talking to corporate insurance customers about their supply chains, including insurance,” Bosshard said.
“They should realise that it is in their interests to comply with the Paris Climate Change accords,” he added.