Chubb Ltd. says it will stop insuring coal-fired power plants, establishing a policy intended to bear down on an energy source increasingly falling out of favor.
The Zurich company, the largest commercial insurer in the U.S., said it will no longer sell insurance to new coal-fired power plants or sell new policies to companies that get more than 30% of revenue from thermal coal mining.
Coverage for companies that exceed that threshold will be phased out by 2022.
Chubb also will not make new debt or equity investments in companies that generate more than 30% of revenue from thermal coal mining or energy production from coal.
"Chubb recognizes the reality of climate change and the substantial impact of human activity on our planet," Chief Executive Officer Evan Greenberg said.
The potential physical effects of climate change present a "significant risk" and have been integrated into the overall risk management process of Chubb, the world's largest publicly traded property and casualty insurance company.
"Our approach to risk management is to identify all known and emerging risks that could have an impact on overall capital levels and financial results," it said.
In a 2019 environmental report, Chubb said natural catastrophe losses in 2017 were more than $135 billion.
Betsy Monseu, chief executive officer of the American Coal Council, said Chubb's decision is disappointing.
"Diversification of power generation assets is fundamentally important to reliable electricity supply and to well-functioning markets," she said. "Investment policies that are broader and more inclusive, rather than narrower and more restrictive, are needed."
Advanced high-efficiency, low-emissions coal-fired power plants are being built in many countries and should be encouraged by electricity policy and investment objectives and to replace retiring plants, Monseu said.
A spokesman for Travelers Cos. Inc. did not say if the property and casualty insurer will follow Chubb with a policy on coal-fired plants.
Environmental activists praised Chubb's announcement. Without insurance, power plants can't operate and potential builders can't get necessary permits.
"As more and more companies withdraw, it's more difficult to find options and more expensive to do so," said Elana Sulakshana, energy finance campaigner at Rainforest Action Network, which is pushing insurers to drop insurance coverage of coal and tar sands.
Chubb is the 16th insurer to drop insurance coverage of coal-fired plants and mining operators, according to environmental advocates. Most of the other insurers are based in Europe. Activists have been pushing businesses to divest coal company investments and also are urging banks to end financing of coal interests.
Coal as a source of power to generate plants has been diminishing over the years in response to falling natural gas prices and state energy portfolios that increasingly call for cleaner energy. Though a fossil fuel, natural gas accounts for more than 60% of the fuel mix in New England, according to grid operator New England Independent System Operator.
Nuclear power accounts for about a fourth of the mix. Hydropower and renewable energy such as wind and solar are 13%, and other forms of power account for about 1%, according to the grid organization.
Sean Kevelighan, chief executive officer of the Insurance Information Institute, said Chubb's decision is one of several strategies by the industry to grapple with climate change. Insurers also are working to improve resilience to storms, "to get ahead of catastrophe" and reduce property damage.
"Some are actively divesting, some are being active investors," he said. "The industry is looking at solutions."
Because of Chubb's size, however, "people are obviously going to pay attention," Kevelighan said.
Business on 07/03/2019