Good morning. Here’s what you need to know to start your day.
Investing in an ‘existential threat’
The Palisades and Eaton fires will likely go down as the most economically costly disaster in state history — and among the costliest in U.S. history.
The historic destruction arrived after major insurance companies announced they would stop writing new policies in the Golden State, citing in part the increasing risk of devastating wildfires.
The retreat indicates that insurers are responding to what scientists have been telling us: Human-caused climate change is intensifying wildfires, rainstorms and other weather events. And that climate change is being driven primarily by our continued burning of fossil fuels.
But insurance experts, consumer advocates and environmental groups accuse insurance companies of perpetuating the climate crisis by continuing to invest hundreds of billions in the fossil fuel industry.
A burned car and home in Altadena after the Eaton fire. (Allen J. Schaben / Los Angeles Times)
With the fires fresh in many Californians’ minds, they’re renewing calls for insurers to get their money out of the polluting industry that’s fueling disasters.
How much money do insurance companies have in fossil fuels?
More than half a trillion dollars as of 2019, according to a 2023 study led by the nonprofit Ceres.
Researchers analyzed data provided by property and casualty companies and life insurance groups and found that top 16 insurers in the U.S. “held approximately 50% of the over $500 billion dollars in fossil fuel-related assets owned by the sector. “
Among property insurers, State Farm and Berkshire Hathaway had the most money invested by orders of magnitude — $30.9 billion and $20.9 billion, respectively.
It’s not just investing. Insurers are also underwriting fossil fuel projects, which researchers argue “helps greenhouse gas-intensive industries continue operations contributing to global warming.”
A firefighter battles a house fire off Bollinger Drive in Pacific Palisades. (Wally Skalij / Los Angeles Times)
California was instrumental in shedding light on U.S. insurers’ investments.
Back in 2016, Dave Jones, the former California insurance commissioner who now leads UC Berkeley’s Climate Risk Initiative, launched the Climate Risk Carbon Initiative, which required large insurance companies to disclose their investments in the fossil fuel sector.
Jones also asked insurers operating in the state to voluntarily divest from coal, writing in a statement that “investments in coal and the carbon economy run the risk of becoming a stranded asset of diminishing value.”
The following June, Jones received a letter from 12 attorneys general and a governor in Republican-led states. They threatened legal action if Jones did not end his initiative, accusing him of harming energy companies and insurers that operate in their states with “public shaming.”
Jones wrote back, telling those state officials that he was “not deterred by your threats.”
“Although it is politically popular in your states to deny or ignore climate change, ignoring the potential financial risks to insurer investments from climate change is irresponsible and even reckless,” his letter states.
“I said, ‘but if you want to sue me, bring it on,’” Jones recounted. “They didn’t sue.”
A person holds a hose to a smoldering house as he tries to prevent its spread during the Eaton fire. (Robert Gauthier / Los Angeles Times)
The data collected from Jones’ request was made publicly available on hisdepartment’s website. Ceres later analyzed the assets reported by insurers in 2019, presenting them in their 2023 report.
For Jones, the industry’s involvement in fossil fuels is a nonsensical conflict of interest.
“We know that it’s the fossil fuel industry’s emissions that are the primary driver of climate change that’s [contributing to] these catastrophic weather-related events, that’s causing insurers to have to jack up rates and or stop writing insurance — it makes no sense,” he said. “Basically, insurers are investing a half a trillion dollars in the industry that is posing an existential threat to their ability to write insurance.”
State Farm, Berkshire Hathaway and Allstate did not respond to requests for comment.
What can lawmakers (and policyholders) do?
Jones, along with consumer advocacy and environmental groups, have been urging states to challenge the insurance industry through new laws that would require them to transition away from fossil fuel investments.
Carmen Balber, executive director of L.A.-based Consumer Watchdog, said her group has been asking current California Insurance Commissioner Ricardo Lara to resume his predecessor Jones’ initiative and require insurance companies to report their fossil fuel investments again. Lara previously denied that request.
“Insurance companies are passing all the costs of climate change onto policyholder … but keeping all the profits,” she told me. “If climate change is making insurance losses worse — and there is no question that they are — the insurance industry should not be contributing to that problem,” she said.
The first step, Balber said, would be a transparent process so property owners could see how much money the companies that write (or don’t write) their policies are investing in or making off fossil fuels.
If the public was better aware of that, she argued, people could vote with their pocketbooks by opting to purchase insurance from firms that have committed to divest from fossil fuels.
“That list is not available, unfortunately, because we don’t have those kinds of commitments,” she said.
There was an attempt at federal legislation, via a 2023 bill co-authored by then-Rep. Adam Schiff. It would have required major insurance companies to disclose all their investments and underwriting related to fossil fuels.
“Insurance companies like State Farm and Allstate shouldn’t be allowed to profit from the climate crisis while neglecting vulnerable communities,” Schiff wrote in a statement at the time. “Requiring insurers to publicly disclose their fossil fuel investments will help build transparency and empower people to make informed choices about their coverage.”
That bill died in a House committee later that year.
No comments:
Post a Comment