The withdrawal of insurance companies from the coal sector is starting to bite. Insurance rates for coal companies are rising, which adds to their difficulty competing with renewable energy providers. In this context it is deeply concerning that Aon, a global insurance broker, is offering to assist coal companies in circumventing the coal exit policies of leading insurers.
A new report from Willis Towers Watson, another leading insurance broker, nicely summarizes the insurers’ recent shift away from coal. “Over the past 18 months or so”, the report finds, “a number of the insurance and reinsurance giants have decided that divestment from coal does not go far enough, and announced restrictions in their underwriting policy towards companies operating in the coal sector.”
The insurers’ coal exit has practical benefits for the low-carbon transition in the energy sector. “Having to factor this element into their bidding will put [coal companies] at a commercial disadvantage when competing with lower-cost greener generators”, Willis Towers Watson reports. “This reduction in available capacity will invariably see upward pressure on rates and coverages as the competition for market share in this specific sector will be much more limited.”
The insurers’ shift away from coal benefits renewables. “Renewable [insurance] programs typically are cheaper than thermal programs, with significantly lower deductibles”, Willis Towers Watson reports. “This trend is expected to continue as traditional insurers look to promote renewable energy for public relations reasons, as well as replace premium lost by exiting the coal-generation space.”
The world’s biggest insurance brokers have all made rhetorical commitments to taking climate action, or have at least acknowledged the seriousness of the climate crisis. Yet so far their climate statements have primarily amounted to a lot of hot air. As reported last month, none of the global insurance brokers followed the example of leading insurance companies and pledged to stay out of the controversial Carmichael coal mine project in Australia.
Aon was the first insurance broker to sign the Principles for Sustainable Insurance in June 2018. In the September 2018 report, Climate Change Challenges, Aon emphasized that “a rapid shift away from fossil fuels in favor of renewable energy sources is needed”. The consequences of failing to take action in time “may be catastrophic”, the broker warned.
Given the company’s support for a rapid shift away from fossil fuels, you would expect Aon to welcome the insurance industry’s trend away from the coal sector. Yet in practice, the broker has discovered a commercial opportunity in undermining the climate leadership of the insurers which have taken action on coal.
In several articles and webpages, Aon executives are advertising their services in helping coal companies to circumvent the coal exit policies of climate-conscious insurance companies. “Over the next few years”, Aon states, “we will be working hand-in-hand with clients to identify what insurances may be withdrawn from their program, followed by actionable plans to close those gaps. In most cases, this will involve the identification of alternative insurers to on-board into their insurance program – whether this is insurance from new markets, or through unexplored relationships.”
Circumventing the pioneering actions of other companies flies in the face of the climate leadership which Aon has embraced in its rhetoric. Climate conscious insurance companies, on whose cooperation the broker depends, should make it clear that they no longer accept that Aon undermines their climate leadership.
As the t-shirt sponsor of Manchester United, Aon is clearly concerned about public image. They should be forced to choose whether they want to be seen as a climate villain or a climate champion in the coming months. For now, Aon deserves a red card for its shameful climate hypocrisy.