Bermuda insurers and climate change
The past five years have been the hottest on record. “The climate crisis has arrived”, more than 11,000 scientists just warned in a public statement, “and is accelerating faster than most scientists expected. It is more severe than anticipated, threatening natural ecosystems and the fate of humanity.”
Unprecedented wildfires, hurricanes, floods and droughts illustrate the warning of the academics.
We can still avoid unmanageable climate breakdown — if we move away from coal and other fossil fuels as quickly as possible. United Nations Secretary-General António Guterres called on the global community to stop building new coal plants by 2020, and the Bermuda Government has adopted a policy to rapidly shift its electricity sector from imported gas to renewable energy.
A new report published by the Unfriend Coal campaign shows that the insurance industry is shifting away from fossil fuels as well. Since 2017, at least 35 insurance companies have divested from coal and 17 leading insurers have ended or limited insuring coal projects. The climate leaders make up 46 per cent of the non-life reinsurance market and include most of the global players that historically led risk assessments for new coal projects.
Such restrictions are starting to take their toll on the coal sector. The international insurance broker Willis Towers Watson has found “a significant reduction in available capacity” and “upward pressure on rates” for coal companies. Renewable energy providers on the other hand are benefiting from an influx of new insurance capital.
The Adani Group's proposed Carmichael mine in Australia, which would produce 4.6 billion tonnes of carbon dioxide over its lifetime, has become a test case for the viability of new coal projects. So far at least 16 international insurers, including Bermuda's Axis Capital, have ruled out insuring the project in one way or another, and the developer is now hoping to secure cover from other specialty insurers. The action taken by global insurers means that any underwriter that steps in to rescue the project will take on a heavy responsibility for aggravating climate change.
Bermuda is a hub of specialty insurers. Through the Association of Bermuda Insurers and Reinsurers, they have worked to better assess climate risks since 2009. Yet many of them, including carriers such as Allied World, Argo Group, Everest Re, Hamilton and Lancashire, continue to play an active role managing the risks of fossil-fuel projects and companies.
Among the insurers headquartered in Bermuda, only Axis Capital has so far adopted a policy to exit the coal — and tar sands — sectors. XL Catlin quit these sectors when it was acquired by French insurer Axa in 2018. “We believe this new thermal coal and oil sands policy is the right thing to do for our planet and our business”, Axis Capital's general counsel Conrad Brooks commented when the company announced its decision.
Against the international trend, most Bermudian specialty insurers are sticking to coal and other fossil fuels. The broker Willis Towers Watson found: “The Bermuda market has supported the [coal] class through the various underwriting cycles, demonstrating commitment to the industry. And while there are instances of markets pulling back from or exiting Thermal Coal, the core Bermuda carriers remain steadfast, and have largely maintained a consistent appetite.”
By continuing to underwrite new coal projects, Bermudian insurers are counteracting the Government's efforts to shift away from imported fossil fuels and strengthen resilience to climate change. They also risk undermining the progress made by other global insurers.
Bermuda is highly vulnerable to rising sea levels, ever more powerful hurricanes and the bleaching of coral reefs. “Our very home is on the front line, facing the consequences of this global environmental shift,” Adam Farrell, a member of the Bermuda Environmental Sustainability Taskforce's marine resources committee, argued in The Royal Gazette in February.
“How can we expect the larger countries to take notice of the threat climate change poses to smaller island nations, and therefore take action, if we do not ourselves do as much as possible that is within our control to fight the causes of global warming?”
In his day job, Mr Farrell is an assistant vice-president of Chubb Bermuda, a carrier headquartered in Switzerland. Chubb adopted a policy ending support for most new coal projects in July. Bermudian-based insurers must join the international trend and end support for coal.
• Peter Bosshard directs the finance programme of the Sunrise Project and co-ordinates the Unfriend Coal campaign. The campaign's new report is available at unfriendcoal.com