CALGARY – As global climate change threatens to wreak havoc on their industry, insurance companies are increasingly looking to limit their exposure to the fossil fuel sector.

“This was not an issue that was central to the insurance industry, even 7 years ago,” said Robin Edger, national director of climate change for the Insurance Bureau of Canada. “But now he’s moving at the speed of light.”

Over the past three years, 23 major global insurance companies have adopted policies that terminate or limit insurance for the coal industry, and nine insurers have terminated or limited insurance for the Canadian oil sands.

Other insurance companies are changing the assets of their books, divesting their fossil fuel investments and adding green energy to their investment portfolios. In July, eight of the world’s largest insurance companies, including Swiss Re, Zurich Insurance Group and Aviva, committed to reducing their portfolios to net zero greenhouse gas emissions by 2050.

The “sustainable finance” movement – which seeks to use the power of private equity to move towards a low-carbon economy – also includes pension funds, banks and mutual funds. But of all institutional investors, insurance companies are perhaps the most at risk when it comes to climate change.

According to the Insurance Bureau of Canada, the average annual cost of claims for property damage or loss due to extreme weather conditions has more than quadrupled over the past decade to reach $ 2.4 billion in 2020. This figure is expected to increase. continue to increase. An alarming United Nations report earlier this month said the world would cross the 1.5 degree Celsius mark of warming in the 2030s, leading to more floods, fires and heat waves.

In search of more payments amid ever-increasing risk, the global insurance industry has been pushing for years for governments to take more action on climate change. But it’s only recently that insurers have started to take a hard look at their own investments in fossil fuel companies.

In Europe, where disclosure of fossil fuel investments is mandatory for state-owned companies, insurers are moving faster than their North American counterparts, said Victor Adesanya, lead author of a recent DBRS Morningstar report on the subject.

But even in the United States and Canada, where disclosure of fossil fuel holdings is not required, the problem is growing, Adesanya said. Manulife Financial, for example, has pledged to value its own $ 39.8 billion portfolio with the goal of reaching net zero by 2050.

“For them (North American insurers) to turn off the taps and stop investing right away, I don’t see that happening,” Adesanya said. “But there’s a trend that’s started, and it’s going to start to escalate.”

Environmental groups are also increasingly putting pressure on the insurance industry, demanding that they stop underwriting coal mines, coal-fired power plants and other fossil fuel projects. They have had some success – a handful of global insurers have said publicly this year that they will not provide cover for the expansion of the TransMountain pipeline.

“To me, this illustrates real change in the industry,” said Mary Lovell, who leads insurance campaigns for the San Francisco-based environmental group Rainforest Action Network. “These insurers understand the reputational risk of being involved in such a contentious project as TransMountain, as well as the significant risk of building a new pipeline during a climate crisis.”

Edger, of the Insurance Bureau of Canada, said the industry will closely follow the UN Climate Summit COP 26 in Glasgow in November, where the issue of sustainable finance is expected to be a major topic.

This report by The Canadian Press was first published on August 22, 2021.

Amanda Stephenson, The Canadian Press