Insurance

Insurance companies are in a unique position to accelerate the transition to a renewable energy future. Fossil fuel projects and operations require insurance to initiate and operate. Many major insurance companies have backed away from insuring new coal projects. A critical mass of insurers have begun limiting coverage for conventional oil and gas projects, including Chubb Limited, one of the world's most significant publicly-traded property and casualty insurers.

North America is one of the largest regional markets for oil and gas insurance; as of 2018, it accounted for 43% of global premiums. Yet recent analysis has shown that American insurers lag in adopting policies to limit coverage for fossil fuels compared to European peers.

Insurers are also significant institutional investors in fossil fuels; as of 2021, U.S. insurers have $582 billion invested in fossil fuels. Furthermore, these insurers still have nearly $90bn of investments in coal, use of which must be rapidly phased out under the IEA Net Zero Emissions by 2050 Scenario (“NZE”).

 
 

  • A crucial step for any U.S. insurer in aligning its activities to limiting warming to 1.5°C is committing to reducing its scope 3 insured emissions to net zero by 2050 at the latest. Pursuant to those targets, insurance companies should adopt robust interim targets that seek to reduce their absolute insured emissions.

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  • Insurance companies should ensure all services provided to the fossil fuel industry are consistent with a 1.5°C pathway and in line with the NZE. This means adopting exclusion policies and exit strategies to immediately end all insurance coverage for coal projects and companies, end insurance for new oil or gas expansion projects, and begin phasing out support for oil and gas companies, in line with a 1.5°C pathway. Insurance companies should prioritize insurance of and investment in clean energy projects to accelerate a decarbonization transition.


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  • Insurance companies should commit to disclose and measure climate impact and insured emissions through a rigorous and accepted framework, for example the Partnership for Carbon Accounting Financials (PCAF). In partnership with the Net-Zero Insurance Alliance, PCAF released its Global GHG Accounting and Reporting Standard for Insurance-Associated Emissions in November 2022. As of March 2023, 18 insurers have disclosed, or committed to disclose, their emissions from insurance and reinsurance activities under this standard, including two U.S.-based insurers. This reporting should allow regulators and the public to understand the extent of an insurer’s climate exposure, the level of risk an insurer bears, and the magnitude of its contribution to systemic climate risk.

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Summary Table

Target setting

1.1

Commit to net zero emissions by 2050 for insurance and reinsurance underwriting portfolios

1.2

Robust interim targets that reduce the absolute impact of insured emissions, pursuant to a net zero emissions target

Fossil fuel exclusion policies

2.1

Robust exclusion policies and exit strategies to immediately end all insurance coverage for coal projects and companies, end insurance for new oil or gas expansion projects, and begin phasing out support for oil and gas companies, in line with a 1.5°C pathway  

Disclosure and measurement

3.1

Disclose and measure climate impact and insured emissions through a rigorous and accepted framework