Insurers fuelling climate crisis

By Elise Peterson-Trujillo (from Public Citizen) and Justin Stevens

In August 2021, the global insurance firm AIG was the headline sponsor for the British Women’s Open Golf Tournament. In the same month, the Sixth IPCC report made clear that, in order to keep the planet within 1.5°C of warming, all fossil fuel production must be rapidly phased out. There is no ambiguity in that report; as noted by the U.N. Secretary-General Antonio Guterres:-

“The alarm bells are deafening, and the evidence is irrefutable: greenhouse gas emissions from fossil fuel burning and deforestation are choking our planet and putting billions of people at immediate risk.”

In just under a decade, we have witnessed wildfires, tropical storms, and other natural disasters increasing in both numbers and intensity. The last decade saw a record high of $3 trillion in economic losses from natural disasters—over a trillion more than the previous decade. The increase in frequency of natural disasters can largely be explained by changes in the world’s climate brought about by human activity, namely the extraction and combustion of fossil fuels.

Insurance companies are uniquely vulnerable to the climate crisis due to their obligation to pay for covered damages from natural disasters. Despite this, global insurer American International Group (AIG) said it’s not very concerned about paying for worsening climate damage because it can just raise prices or drop coverage — and some insurers are also starting to talk openly about getting the government to pay for the damage.

But there’s even more to the story: insurers like AIG are putting people and the planet at increased risk by providing insurance coverage to fossil fuel projects. At the time of sponsoring the August Golf Tournament, this upstanding insurance firm was also allowing multiple fossil fuel extraction projects to continue and start.

The fact is – despite their seeming Goliath status – fossil fuel companies need insurance just as much as other businesses: they can’t get projects approved or financed without it. However, despite a $518 billion price tag on damages to insured property from natural disasters in the U.S alone over the last decade (compared to $190 billion the previous decade), insurers continue to enable the very projects making those disasters more frequent and more destructive.

The role of AIG in this is significant not only due to its size, but because it is one of the few remaining insurers able and willing to provide coverage to multi-billion dollar coal projects. That, coupled with the fact it is the world’s top three oil and gas insurers, makes it especially culpable. Meanwhile, other insurers have recognised that climate change poses a threat to their industry: at least 26 have ended or limited the insurance they provide to the coal sector. 

But AIG has yet to adopt a single policy to phase out its coverage of fossil fuels. In June of this year, AIG released its first ever “Environmental, Social, Governance Report”, in which the company reaffirmed its policy to insure and invest in fossil fuels. 

If the climate crisis is to be effectively tackled, multi-national insurers like AIG and other financial institutions must stop propping up the continued extraction of fossil fuels and destruction of natural carbon sinks like the Amazon. There is also a dark irony in how many of the worse perpetrators have headquarters in nations that have a heightened responsibility for causing climate change: America (entities like AIG and Black Rock), together with the UK (Barclays and the many London-based investment firms). Despite mounting pressure to divest, the amount of money these entities funnel to the fossil fuel industry is in the billions.

The question arises: when – and how – will they pay for the damage they have done?

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