COVID-19 has awakened us to our collective unpreparedness for global shocks. Too many have lost their lives and livelihoods, and the world economy has been plunged into the worst crisis since the Great Depression. But we would be making a huge mistake to pretend any intelligent recovery from this catastrophe would be complete without preparing ourselves for the other giant shock scientists have warned us about for decades: climate change.
For the insurance industry, which is supposed to be better prepared for shocks than anybody, there is no more time to put it off.
While COVID-19 will hit insurers with a perfect storm of payouts for life, health, and business interruption insurance, litigation, and a tanking of the stock markets, climate change will not hit like a single storm. Insurers have already felt the impacts, which will only increase in intensifying waves: year after year of property damage, changing food and water supplies, chronic health effects, increasing mortality from extreme weather. Insurers are uniquely exposed to all of them and would be wise to begin mitigating those impacts–and its their own exposure– now.
Through their underwriting, insurers choose what kinds of projects businesses can undertake. Because insurers still see money to be made, they insure new drilling projects, new fracking wells, new dirty oil pipelines that endanger water sources, and new coal and gas-fired power plants that spew pollutants. Scientists tell us that these projects should never be built. But insurers continue to enable them, locking us into dirty and expensive energy that fuels extreme weather and worsens public health.
Perhaps even more nonsensically, insurers invest hundreds of billions of dollars of their customers’ premiums in fossil fuels. Ten percent of the $2.5 trillion in assets managed by Connecticut’s top insurers is invested in fossil fuels. While business leaders from BlackRock to the Bank of England, emphasize that “climate risk is investment risk,” top life, health, and property and casualty insurers are still investing like it’s 1956. According to publicly available data from the California Department of Insurance, The Hartford had $3.3 billion of its $13.7 billion under management invested in fossil fuels and utilities, including almost $700 million in thermal coal. Travelers had about $3 billion of its $35.7 billion invested in fossil fuels and utilities. That’s about 24% and 10% respectively. Meanwhile, Cigna had about $2.3 billion, or 13.5% of its assets invested in fossil fuels.
For a health insurance company like Cigna to be heavily invested in an industry that sickens so many is an obvious act of hypocrisy. In the case of Travelers, which recorded after-tax losses of $1.3 billion in 2018 from natural catastrophes, including $314 million from the Camp Fire in Northern California alone, executives should be up in arms alongside Greta Thurnberg. Instead, they have introduced exactly zero policies that address fossil fuel insuring or investing, while overseeing significant holdings in Chevron, Exxon, and other fossil fuel companies.
While The Hartford adopted a conservative policy to limit fossil fuel business last year, the company has not begun to demonstrate how it will make good on its modest commitments. Meanwhile, it continues to have holdings in the world’s worst polluters, including Chevron and fracking giant Chesapeake Energy.
Connecticut-based insurers have been de facto U.S. industry leaders for decades. Yet, they are far behind their European and Australian peers. By the end of 2019, 19 of the world’s biggest insurers, controlling 48% of the global reinsurance market and 14% of the primary insurance market, had coal exit policies. At least 35 companies with combined assets of roughly $8.9 trillion – 37% of the industry’s global assets – have now adopted coal divestment policies. Although 2019 saw some limited progress by U.S. insurers, the overwhelming majority of Connecticut-based insurers haven’t done a thing to reduce their support for fossil fuels.
More than 1,440 domestic and international insurance companies make their home in Connecticut. The state ranks first in the United States for the percentage of workers employed by the industry. In Hartford alone, insurance companies employ more than 63,500 people. We write this not solely as concerned people who want the world to be livable for our children and grandchildren, but as Connecticut residents who see our state’s flagship industry fundamentally harming itself.
As Connecticut insurers enter the height of shareholder season, climate activists here are putting insurers on notice. It is time to do your part to mitigate and prepare for the impacts of climate change. Sell off your assets in fossil fuels. Stop underwriting projects that expand fossil fuel use. Catch up with your international competitors and commit to sustainability policies in line with the Paris Climate Accord.
We realize these will not happen immediately, but you need to begin now. For starters, we are calling on auditors selected at this year’s shareholder meetings to finally do the necessary work of quantifying companies’ risk of underwriting and investing in fossil fuel projects. The climate emergency threatens life, health and the economy, and will continue do so for future generations if nothing is done. COVID-19 must be a wake-up call to our state’s flagship industry to take substantive action now to avoid the equally devastating impacts of climate change.