Why target insurance companies?
There are many ways to tackle the crisis, but changing the insurance industry is one of the most strategic, powerful and underused approaches. Fossil fuel projects need three things to operate: permits, money and insurance. Fossil fuel companies need insurance to operate and expand, but insurance companies don’t rely on the fossil fuel sector, as it only makes up a small part of their business portfolio.
Insurers are the risk managers of our society. Their job is to measure risk and protect people from it, to essentially be a safety-net for when things go wrong. But the insurance industry is setting fire to our collective safety-net by insuring and investing in new and expanded fossil fuel projects. By enabling more coal, oil, and gas, they are paving the way to an uninsurable, unstable and dangerous world.
Moving a small number of some of the largest fossil fuel insurers in can have a huge impact. We’ve seen this in the coal sector! Within a few years, 45 companies have committed to end or restrict underwriting for coal projects, and it has become very difficult for companies to find adequate insurance for new coal power plants.
Pressuring companies to stop supporting the East African Crude Oil Pipeline is also an example of how civil society can help to block and delay the construction of a new oil pipeline. Twenty-nine insurance companies have refused to insure this disastrous project as of today and the project has been delayed for over 4 years, unable to secure financial close.
Moreover, the insurance industry is particularly sensitive to the need to recruit and retain the next generation of talent: between 2021 and 2036, 50% of the current U.S. insurance workforce will retire, leaving more than 400,000 open positions unfilled.
The role of fossil fuel companies and financial actors like banks in the climate crisis are well-known. It’s time to make insurance companies know that civil society, students, and prospective employees are also aware of their responsibility in fuelling the climate crisis and that they demand they be part of the solution, not the problem.
Aren’t insurance companies doing their best to become more sustainable?
The science is clear. We are currently in an accelerating climate crisis, and to keep within the 1.5°C warming limit emissions need to be reduced by at least 43% by 2030 compared to 2019 levels, and at least 60% by 2035. In its Net Zero by 2050 scenario, the International Energy Agency is unequivocal: new fossil fuel infrastructure like coal mines, oil and gas fields and liquefied natural gas (LNG) terminals developed after 2021 threaten the likelihood of limiting the warming under 1.5°C.
Since at least 2021, climate scientists have agreed that we need to stop expanding fossil fuel extraction immediately and phase out the production of coal, oil and gas at an ambitious pace in order to avoid unmanageable climate breakdown. In its 6th Assessment Report, the Intergovernmental Panel on Climate Change (IPCC) found that the window to limit global warming to 1.5°C is rapidly closing and will require “phasing out all unabated fossil fuels”.
Despite these clear science based climate guidelines, the shift away from fossil fuels does not meet the urgency of the climate crisis, and most insurers continue to underwrite the expansion of oil and gas infrastructure.
It’s been 50 years since the insurance industry first warned about the risks of climate change. Yet after half a century, the industry’s climate actions remain completely insufficient. Two years after the Glasgow climate summit, the net zero commitments of most insurance companies have resulted in a lot of paperwork, some modest practical steps and a lot of greenwashing.
Since 2017 annual insured losses from natural catastrophes such as floods, hurricanes, wildfires and droughts (which in many cases are human-made disasters) have averaged over $110 billion, more than twice the $52 billion average of the previous five years. In response to the increasing frequency and severity of climate disasters, the insurance industry is withdrawing from insuring climate risks and withdrawing their cover from regions particularly affected by climate change and extreme weather events.
However, insurance companies can do better. They have a huge amount of power to change the course of history at this vital time and shift our societies away from fossil fuels, accelerate the energy transition and ensure greater protection from climate risks.
Don’t we need students and other new hires in the insurance industry to make change from the inside?
As the insurance sector worldwide struggles to recruit younger generations and is facing a major generational gap, students have the power to draw the red line by no longer accepting to work for companies that continue to support fossil fuels and demand for greater climate action.
It’s true, we need climate concerned students and professionals to push for greater climate action within every sector of society. But in complex hierarchical structures of big corporations, it can take years to reach a position where one can change a companies’ sustainability policies.
I don’t want to work for insurance companies: can I make any difference?
Whether or not you plan to work in the insurance industry, you can have a decisive impact. It’s not just students in economics, finance, business, finance, accounting, or actuarial science that is important to insurance companies. Insurance companies often say that working in the industry isn’t a vocation, and many different people end up in the sector. They seek to attract talent with diverse backgrounds, including you!
Insurance companies also need to recruit a wide range of talents, such as IT and AI specialists, communication and marketing experts, as well as professionals in sustainability, ESG, law, human resources, international relations, among many others.
The image and reputation of corporations is their most valuable asset—and that’s something all students can challenge. Demanding greater climate action and advocating for it is the first key step to achieving it!