Insurers continue to underwrite thermal coal despite net zero pledges
The world’s biggest insurers continue to underwrite at least third of coal mining projects in the US, despite pledges to phase out thermal coal mining from their liabilities.
More than a dozen insurers, including Swiss Re, Lloyds of London, AIG, Zurich and Liberty Mutual continue to underwrite between 30 and 40% of coal mining in the US, despite having adopted restrictions on underwriting coal, as campaign groups Insure Our Future and Public Citizens reveal.
Coal is the largest contributor to carbon dioxide emissions and the US remains the fourth largest producer. In response to pressures from campaign groups, 45 insurers have now pledged to phase out the underwriting of thermal coal projects.
In phasing out coal, insurers face a challenge of distinguishing between two different types of coal products, thermal and metallurgical coal. While the former is mainly used for energy and heating, metallurgical coal is for the time being a key component in steel production and therefore also a key element for the renewable energy transition.
Many insurers have therefore committed to phasing out thermal coal but continue to make an exception for metallurgical coal production, arguing that it remans a vital ingredient for steel production. This notion has been challenged among others by the International Energy Agency, which highlights the opportunities for producing steel with hydrogen, rather than coal.
AIG committed last year to phase out any investments or underwriting of thermal coal projects with immediate effect. Yet in terms of production capacity, it remains the largest insurer to the US coal sector.
Last year, it underwrote the production of 167,428,662 short tonnes of coal across seven mines, including thermal coal production, according to data provided in a Freedom of Information Request to campaign group Public Citizen. It declined to comment on the reports.
It is closely followed by the Underwriters at Lloyds of London, which last year backed the production of 135,403,277 short tonnes of coal in the US across ten mines, despite having pledged to phase out its entire thermal coal underwriting by 2025. "As all insurance in the Lloyd’s market is underwritten by managing agents, not Lloyd’s itself, it is for the individual businesses that operate in the Lloyd’s market to make their own business and strategy decisions. Lloyd’s will provide guidance and oversight to the market that supports managing agents on delivering their strategies as part of insuring a global transition" a spokesperson told Net Zero Investor.
Swiss insurers Zurich and Swiss Re also hold significant exposure to the US coal industry, despite having been early adopters of anti-coal pledges and having been members of the Net Zero Insurance Alliance until recently. Both continue to distinguish between thermal and metallurgical coal and plan to phase out thermal coal.
Swiss Re has pledged in 2021 to phase out thermal coal by 2030 for OECD countries including the US and will cease to underwrite new thermal coal projects for the rest of the world by 2040. A spokesperson for Swiss Re told Net Zero Investor that it fully adheres to its thermal coal policy and remains firmly committed to its targets for phasing out thermal coal. However, it declined to comment on individual transactions.
Last year, it still underwrote at least one mine in the US, Buckskin Mining which is responsible for the production of 18,233,969 short tonnes of coal. Campaigners say that the company is likely to exceed the 30% thermal coal threshold set by Swiss Re and that underwriting it was in violation of Swiss Re's net zero pledges.
Zurich has pledged to remain committed to tackling climate change despite exiting the Alliance. But reports show that it has underwritten the production of 29,320,227 short tonnes of coal last year.
However, Zurich says its backing for these coal plants is not in violation of its policies, given that both plants focus on metallurgical coal. "Zurich is committed to achieving net-zero by 2050 and we continue to focus on supporting our customers navigate their transition" a spokesperson told Net Zero Investor.
The NZIA has faced an exodus of members earlier this year, amid growing concerns over pressures from the anti-ESG movement.
The network, which is part of GFANZ, intended to put a Target Setting Protocol in place this summer. However, plans have been abandoned amid a mass departures of members.