Insure Our Future's annual scorecard ranks the top 30 global fossil fuel insurers on the quality of their fossil fuel exclusion policies. This year Allianz, AXA and Axis Capital rank best for their coal exit policies, while Aviva, Hannover Re and Munich Re come out on top for their oil and gas exclusions.

At the bottom of fossil fuel rankings are a group of insurers which have yet to adopt any restrictions on providing cover to coal, oil or gas projects, including US insurers Berkshire Hathaway and Starr and Bermudian carrier Everest Re. The UK’s Lloyd’s of London also scores very poorly, having announced a coal exit framework in 2020 but then backtracked by declaring it optional.

Liberty Mutual, Chubb and Tokio Marine have adopted some restrictions on coal but actively insure the expansion of the oil and gas industry. Chinese insurers PICC and Sinosure have not adopted any fossil fuel restrictions but, following Chinese government policy, will no longer cover new coal power plants overseas.

Peter Bosshard, global coordinator of the Insure Our Future campaign and main author of the Scorecard, said: “Insurance is the Achilles heel of the fossil fuel industry and has the power to accelerate the transition to clean energy. All insurance companies must immediately align their businesses with the 1.5C goal of the Paris Agreement and cease insuring new coal, oil and gas projects.”

The worst deal in the world to insure

The report highlights some of the most dangerous projects in development today: the July 2022 auction for exploration rights of 30 oil and gas blocks in the Democratic Republic of Congo (DRC). Some of these blocks – auctioned without the free, prior and informed consent of local communities – overlap with protected areas, including Virunga National Park, a World Heritage Site, and with the peatlands of the Cuvette Centrale, a biodiversity hotspot containing about 30 gigatons of carbon, equivalent to three years of global emissions from fossil fuels.

“The Congo oil and gas auction has been called the worst place in the world to drill for oil. The Scoreboard report shows why it may be the worst deal in the world to insure,” said Kuba Gogolewski, finance expert with the Money for Change campaign from Greenpeace, a co-publisher of the report.

“Rejecting the new scramble for Africa by fossil fuel companies and denying their request for re/insurance in the Congo oil and gas auction is a minimum test for the insurance industry’s climate commitments,” said Irene Wabiwa, International Lead for the Greenpeace Congo Basin forest campaign.

The scorecard in detail

At the time of last year’s COP, only Suncorp, Generali and AXA had adopted any restrictions on insurance of conventional oil and gas projects. But in the past year, Allianz, Aviva, Fidelis, Hannover Re, KBC, Mapfre, Munich Re, SCOR, Swiss Re and Zurich have followed suit, bringing the total number of policies to 13. As a result, the market share of insurers with oil and gas restrictions has grown from 3% to 38% among reinsurers, and from 5% to 15% among primary insurers. 18 insurers have ruled out support for Canada's Trans Mountain pipeline and 17 pledged not to get involved in the East African Crude Oil Pipeline.

While the number of oil and gas restrictions is growing, the quality is very uneven. Aviva and Hannover Re have the strongest policies, but are not major actors in the oil and gas sector. More significantly, Munich Re, Swiss Re and Allianz adopted ambitious policies with commitments to stop insuring most or all new oil and gas production projects.

In contrast, AXA and Zurich, both major oil and gas insurers, took only minor steps with commitments to end insurance for oil exploration, but not for new oil production or for gas exploration or production.  Meanwhile, major fossil fuel insurers like AIG, Chubb, Lloyd's and Tokio Marine have not yet adopted any restrictions on conventional oil and gas.

Coal, meanwhile, has become increasingly uninsurable outside of China. The number of coal exit policies has grown from 35 to 41 this past year, with major US insurers AIG and Travelers finally joining the fray. The market share of insurers with coal exclusions has reached 62% in the reinsurance and 39% in the primary insurance markets. Many of the remaining insurers without coal exclusions are not active in the fossil fuel sector and the remaining coal insurers lack the expertise or capacity to underwrite large new coal power plants outside China, the Insure Our Future report concludes.

Disaster capitalism

Munich Re estimated that in 2021, climate disasters caused losses of $280 billion, up from $210 billion in 2020 and $166 billion in 2019. Most recently, Hurricane Ian has demonstrated that risks caused by the climate emergency are making insurance unaffordable for growing parts of the population.

While numerous reinsurers have ended or reduced their exposure to natural disasters, the largest actors – particularly Munich Re, Swiss Re and Hannover Re – view climate risks as a business opportunity and have increased their rates for natural catastrophe cover. Insurance companies are passing these premium increases on to their customers and withdrawing altogether from areas which are highly exposed to climate risks.

Elana Sulakshana, Senior Campaigner at Rainforest Action Network, said, “Insurance companies can’t be expected to absorb the growing costs of climate disasters alone, but it is unacceptable that they are abandoning climate-affected communities while continuing to fuel the climate emergency by underwriting the expansion of fossil fuel production."

Moreover many climate disasters can no longer in truth be called ‘natural’ disasters. As attribution science improves, insurance companies could determine which fossil fuel companies are contributing to their growing losses, and by how much. Rather than passing these costs on to their customers, insurers should take fossil fuel companies to court and force them to pay up for the losses they are creating. Such legal action would make polluters pay, keep the insurance of climate risks affordable and force fossil fuel companies to stop expanding and reduce their production in line with what is needed to keep global warming to within 1.5C.

The limits of voluntary commitments

In June, the UN’s Race to Zero campaign mandated that members of net zero alliances “must phase down and out all unabated fossil fuels”. Yet Renaud Guidée, Chair of the Net-Zero Insurance Alliance, has said that, despite the new UN criteria, he has no plans to require the 29 members of the alliance to exclude coverage of fossil fuel projects.

The lack of sufficient voluntary action by the insurance sector highlights the need for greater regulation. In June, as part of its sanctions on Russia, the EU prohibited the provision of insurance for the transportation of Russian crude oil, demonstrating that regulators can act quickly and effectively in crisis situations.

Ariel Le Bourdonnec, Campaigner at Reclaim Finance, said, “The climate emergency is the defining crisis of the 21^st century and regulators should act as decisively as they have in response to the Ukraine war. They should force insurers to align their businesses with 1.5°C pathways if the companies and their alliances are not prepared to do this on their own.”