Hurricane Dorian has just ripped through the Bahamas, causing catastrophic damage, injuries and fatalities. Wildfires continue to wreak havoc in California, and flash flooding and a freak hailstorm caused chaos and destruction in Spain last month. Climate change is supercharging extreme weather and natural disasters. It is hard to imagine that any company wouldn’t strive to reduce its contribution to this escalating problem – especially those in the insurance game.
16 insurance and reinsurance giants including Axa, Allianz, Chubb, Generali, Munich Re, Swiss Re and SCOR have finally connected the dots between burning fossil fuels and the climate crisis, announcing various coal underwriting policies. However, Poland’s PZU – the largest financial group in Central and Eastern Europe – still doesn’t understand that by supporting coal it not only holds responsibility for worsening the impacts of climate change, it is also undermining its own insurance business.
PZU is responsible for underwriting the majority of the Polish coal mining and power generation sector, and its share has continued to grow. Since February 2018 all but one of the other insurers historically active in the Polish coal sector have abandoned new coal due to the reputational damage it causes, not to mention the increasingly heavy financial risks it comes with.
Smart insurance companies have adopted some kind of limitation to coal underwriting, leaving PZU together with a subsidiary of the German Talanx group – TUiR Warta – as the only insurers that still underwrite new coal and lignite mines planned in Poland, such as the Złoczew mine. This project will not only take 10 years to build, it will prolong the life of the worst CO² emitter in the EU, the Bełchatów thermal power plant, well past 2050. This will be a huge liability for a Europe moving towards a net-zero future, and will come at a huge cost to the health and wellbeing of Polish citizens. For a company working in a sector that is supposed to evaluate and minimise risk, PZU is doing a pretty terrible job.
With reinsurers and insurers meeting this week in Monte Carlo it is time to make decisions and put plans in place to move away from coal in a responsible way. Our chances of staying below 1.5° or even 2° of average global warming shrink with each day a coal plant remains online. It is not possible to simply ‘switch them off’, but it is possible to phase out funding and insurance so utilities finally get the message that there is no future for their plants after 2030. When you’re in a hold, you have to stop digging. For reinsurers like PZU, that means taking responsibility and ruling out underwriting on new coal and mines.
Hannover Re, Munich Re and Lloyd’s should think twice before renewing their reinsurance contract with PZU.
Not only is it in our planet’s best interest to transition away from this deadly and polluting form of dirty energy, it is in the best interest of the insurance industry to stop investing in destructive energy sources that undermine investments and destroy reputations.