Insurers with investments in fossil fuels could be faced with potential threats as renewable energy becomes more prevalent, a new report has found.
The report, compiled by non-profit Ceres, found that the US insurers are the second largest institutional investor in the fossil fuel industry and has called on the insurance sector to plan ahead as climate change and renewable energy continue to shape global markets.
“The global commitment to greenhouse gas reduction, along with long-term market trends and clean energy technological advances, are expected to spur rapid growth in renewable energy,” the report notes.
“As a consequence, fossil fuel companies will confront the growing risk that some of their assets will lose value before the end of their expected economic life.
“In this context, Ceres’ analysis and findings suggest that carbon asset risk may be a potential threat to insurers’ investment portfolios.
“This issue is relevant to all insurance industry stakeholders.”
Cynthia McHale, lead author of the report and director of insurance programs at Ceres, told The Guardian
that risks are also possible from policy-holders as they find out more about insurance investments.
“Their policyholders may not feel comfortable with the fact that their insurance company is investing in oil and gas or coal,” McHale said.
“Maybe we have more risk here than was previously understood, which in turn affects the capital that these insurance companies need to carry.”
The news follows protests held at the recent AGM of QBE
which saw climate activists disrupt the annual meeting of the major insurer.
McHale noted that change will come slowly as insurers continue to grapple with the changing risk and investment landscape.
“It’s a little bit like slowing and turning the Titanic, I think,” McHale said.
“You need to start now by getting your arms around where you are exposed.”
Global insurer AXA recently announced that they would divest more than $2.7 billion worth of assets connected to the tobacco industry as they look to highlight “the positive role insurance can play in society.”