Customers

Insurers are charging you for climate change risks

KENT PORTER / THE PRESS DEMOCRAT VIA AP

KENT PORTER / THE PRESS DEMOCRAT VIA AP

Rather than ditching fossil fuels, U.S. insurers are abandoning customers who live in the path of climate change impacts and seek to protect themselves with insurance. Insurers have increased premiums or withdrawn coverage from regions most at risk to natural disasters that are exacerbated by climate change, such as the coast of Florida or the wildfire-affected counties in California.

As climate chaos increases, the gap between premiums and insurance claims will continue to grow, leaving growing parts of our economy and communities uninsurable.

Insurance companies need to address the root causes of climate change. It is unacceptable that they continue propping up fossil fuel projects while abandoning climate-affected communities.

Insurers are backing fossil fuel companies and then charging you for climate change risks.
— Jacques Leslie, journalist and author

Marginalized Communities

Climate change is one of the biggest threats facing low-income and marginalized communities. These communities often bear the burden of dirty fossil fuel projects and are first to be hit by climate impacts.

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  • Low-income communities are at greater risk of displacement and economic shocks due to extreme weather. They are often in places vulnerable to the impacts of extreme weather, and less able to mitigate its impacts.

  • Low-income people typically lack adequate insurance to replace possessions lost in storms and floods, making the impacts of climate chaos especially devastating.

  • In some cases, federal aid is tied to insurance policies that low-income communities can’t afford. Following Hurricane Harvey, those that could not afford flood insurance were not eligible for FEMA assistance, leaving those living on the margin particularly hard hit.

The insurance industry has a legacy of shirking responsibilities to low-income policy holders. For example, following Hurricane Katrina,  insurers found ways to avoid paying out for flood damage.

Climate change is one of the biggest threats facing low-income and marginalized communities across the globe. These communities often bear the burden of dirty fossil fuel projects and are first to be hit by climate impacts.


Investors

Investors - including the insurance industry, itself a major institutional investor - who invest in fossil fuel companies and infrastructure are projected to face significant losses as the world transitions to a lower-carbon economy. The Institute for Energy Economics and Financial Analysis (IEEFA) pointed out that 2018 was the second consecutive year that the energy sector was at or near the bottom of the S&P 500. This follows a significant downward trend for the coal companies, which lost more than 90 percent of their value from 2011 to 2016 due to decreased demand. The consequence of this can be seen in the New York City’s pension fund, which would have $22 billion more if it had divested from fossil fuel stocks ten years ago, according to an analysis by Corporate Knights.

And for the insurance industry, a recent analysis conducted for California’s Insurance Department identified risks to insurers as investors from both the diminished value of the fossil fuel sector and the increased exposure to climate change events that dirty energy projects face.

As more clean energy comes online, fossil fuel projects will continue to lose their value, leaving investors - including the insurance industry - with stranded assets.