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While several major European insurers and reinsurers are limiting their underwriting of coal risks, some exclusion thresholds are too low to capture the largest global coal producers, according to some experts.
Generally, industry players have set their exclusion thresholds at 30% of revenue or 30% of energy produced from coal. This has limited the effect on major producers because of their diverse portfolios, but Axa S.A. and Assicurazioni Generali S.p.A. have also adopted absolute targets, according to an analysis by Unfriend Coal.
Zurich Insurance Group Ltd.’s policy — announced November 2017 — adopts a threshold of less than 30% for new or existing companies because that level indicates the coal portion of their energy mix will get phased out over time “and we want to give them that chance,” said Linda Freiner, Zurich’s global head of sustainability. Zurich will stop providing insurance or risk management services for new thermal coal mines or potential new clients deriving more than half their revenue from mining thermal coal and utilities generating more than half of their energy from coal. “There’s very little room for dialogue because this is a very coal-focused company" above 50%, she said.
But “some of the definitions are hard,” Andrew Baillie, Arlington, Virginia-based vice president of AES Global Insurance Co., a captive owned by global power company AES Corp., said at the Vermont Captive Insurance Association conference in August. “We have a lot of plants where the plant is sitting idle, but it’s available as required. The question is, are you measuring the megawatts actually running or the megawatts available in case they’re needed.”
Major European insurers and reinsurers are restricting their underwriting of coal exposures amid significant investor and environmental nonprofit pressure, but the trend has not affected the ability to insure coal businesses, as capacity remains plentiful in a still-competitive market.