Earlier this week, QBE declared “2017 will likely prove to be the costliest year in the history of the global insurance industry”. That’s quite a statement from Australia’s only global insurer, but QBE’s failure to mention climate change is revealing.
Given its business in the US, including Puerto Rico, it was only a matter of time before QBE announced the impact of Hurricanes Harvey, Irma and Maria on its bottom line. QBE increased its allowance for catastrophes to US$1.75 billion, on par with its worst ever year in 2011, carving a US$600 million hole in earnings.
If ever you needed to quantify the cost of a decade of toxic debate around energy policy, insurance industry earnings would be a good place to start. Australia’s three largest insurers – QBE, IAG and Suncorp – have all found it increasingly difficult to forecast the cost of natural hazards.
IAG’s natural disaster claims have exceeded provisions by nearly $1 billion over the last decade, Suncorp by $1.9 billion and QBE close to US$1.5 billion. You could call it an actuarial apocalypse.
The great hypocrisy, of course, of insurance companies grappling with natural hazards in an era of climate change, is that they continue to insure the sectors causing most of the damage – coal, oil and gas extraction. To compound the issue, they also invest heavily in the very same sectors, in essence doubling down on their own demise.
It would be quite easy for environmentalists to say ‘we told you so’. However, smugness won’t win us any friends, nor will it bring about the change we need.
Insurers have a major role to play in the climate debate and what we need most from them at this point in time is action.
French insurers AXA and SCOR have ruled out insuring greenfield thermal coal mines. Such an exclusion would apply to Adani’s proposed Carmichael mine. Yet QBE, the only one of our domestic insurers that underwrites coal mines, has refused to rule out insuring what would be the largest thermal coal mine in the world.
The first thing the insurance industry could and should do, is immediately cease underwriting new fossil fuel projects that are clearly inconsistent with the Paris Agreement. For QBE, this would include walking away from insuring Canada’s Tar Sands, which cost them US$53 million after wildfires tore through Alberta in 2016.
Currently, none of QBE, IAG and Suncorp have any restriction on investment in fossil fuel companies or infrastructure. And unlike many of our superannuation funds, our insurers can’t claim they prefer engagement to divestment, because their level of engagement amounts to zero.
They don’t even vote on their shareholdings. Whether it’s a sizeable investment in our largest coal export terminal – the Port of Newcastle, or a passive shareholding in Exxon Mobil, insurers excel at passive investment. But the time for talk has passed, and insurance companies must begin to shift their investments out of fossil fuels.
Thirdly and perhaps most importantly, our insurers need to become climate advocates. For many years, the likes of Aviva plc and Swiss Re have been outspoken on climate change, and genuinely shaped the conversation in the UK and Europe.
However, Australian insurers have remained passive bystanders to our climate and energy debate, even as their catastrophe claims mount.
Last month, Suncorp chairman Ziggy Switkowski told shareholders that it is not “a campaigning company”. Yet Suncorp admits to private lobbying on issues of material relevance. So in effect, it’s just not a public campaigning company.
Well, that has to change. When the Minerals Council is calling for ‘clean coal’ or urging politicians to prolong the life of the Liddell power station, our insurers can no longer sit on the sidelines.
It’s time they spoke up, even if it means getting their noses bloody in the political debate, too.
No-one is suggesting insurers can solve climate change tomorrow. But to continue to do nothing is simply no longer an option. Insurers are at the forefront of climate change, and they understand the risks of a warming world more than any other industry.
It’s in their best interests to advocate for action on climate change, and demonstrate the leadership our climate debate so sorely needs. The sooner, the better.
Dan Gocher is an analyst and campaigner with Market Forces.