Big insurers cover dirty coal mining projects despite climate pledges

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Major insurance groups have provided policies that cover thermal coal mining projects in the US as part of diversified mining groups, despite pledges under their own climate policies to shun the most polluting projects.

Insurance certificates for two US coal mines list Zurich-based reinsurance leader Swiss Re and US insurer Liberty Mutual as providing insurance cover for the operators of projects in Wyoming and Montana respectively.

The certificates, seen by the FT, are held by US environmental authorities and were obtained by the US advocacy group Public Citizen using freedom of information requests.

Global insurers had been writing increasingly strict exclusion policies for thermal coal activities as a result of their climate commitments.

SwissRe was among the industry leaders in 2018 to pledge to stop insuring or reinsuring companies and projects that had more than 30 per cent exposure to thermal coal in order to reach net zero emission targets.

But, like many other insurance and financial institutions that pledge not to cover thermal coal, Swiss Re’s policy allows it to insure groups that own pure-play coal mines, as long as they are part of a diversified portfolio of businesses.

The Wyoming mine’s parent company Kiewit is a diversified construction and engineering group.

Swiss Re said that it “fully adheres to its thermal coal policy”, which involved a “total phaseout of thermal coal related reinsurance in OECD countries by 2030 and in the rest of the world by 2040”. The group could not comment on individual transactions, it added.

This year some of the world’s largest insurers and reinsurers, including SwissRe, quit a collective action group on tackling climate change following legal threats from some Republicans politicians in the US.

SwissRe’s chief executive Christian Mumenthaler told the FT in August that individual insurers would continue to pursue strategies to curb emissions linked to their policies, despite a series of prominent departures from the so-called Net-Zero Insurance Alliance industry group.

But Swiss Re Corporate Solutions America, part of the group’s commercial insurance arm, has agreed to provide cover for claims of up to $20mn to Buckskin Mining Company, valid from March 2023 until March 2024, according to a certificate held by the Wyoming Department of Environmental Quality.

The Buckskin Mine produces 27mn tons of coal a year, making it “one of the most productive mines in the US”, according to its website. It derives more than 90 per cent of its revenue from thermal coal, according to a database maintained by the German environmental and humans rights campaign group Urgewald.

Boston-based Liberty Mutual said in 2019 that it would not underwrite companies with exposure to thermal coal of more than 25 per cent. But its speciality business agreed to insure thermal coal mining company Global Mining Holding Company, LLC, and its subsidiary Signal Peak Energy for up to $2mn, for the two years to November 2023, according to two more certificates.

Signal Peak Energy operates an underground coal mine in Montana with a production capacity of 8mn tonnes a year.

Liberty Mutual said it was continuing to implement its coal policy across its underwriting portfolio towards a target timeline of the end of 2023.

Charles Boakye, ESG strategist at US investment bank Jefferies, said insurers’ climate exclusion policies had been making it increasingly difficult for US coal mines to access insurance in the past year, potentially opening up a “renewed business case” for extending cover at a higher price.

But he added: “In spite of the backlash and noise we’ve seen around ESG, shareholders still expect companies to follow through when they say they’ll do something. From a management perspective, reversing commitments opens up credibility questions.”

The International Energy Agency has said that all coal power without the capture of the carbon emissions must end by 2040 if the world is to limit global warming by reducing emissions to net zero by 2050. But demand for the dirtiest fuel is continuing to rise, after coal consumption hit a record 8.3bn metric tons last year.

This is despite what the IEA described this week as a “staggering” growth in solar energy around the world.

Ehsan Khoman, head of commodities research at MUFG, the Japanese lender, said that progress in renewable energy generation and grid-connection projects had not moved fast enough to cut into demand for coal. “The gap between the reality of the coal market and climate purists remains wide.”