May 27, 2022
The Business Case Against Insuring Fossil Fuels
What: Major insurers across the globe are cutting ties with fossil fuel companies, announcing end dates for coverage or stopping the creation of new policies. For insurers, this could just be good business. A recent review of 30 years of loss data showed that fossil fuel companies caused roughly $60 billion in losses while only $30 million or so came from other companies.
Why it matters: For fossil fuels, insurers have decades of data they can use for underwriting and it makes the risk somewhat simple to price accurately. Renewable energy, on the other hand, is still a small but growing player in the energy sector. In the long run, renewables could be quite the profitable sector to insure, but a lack of data means that renewable energy is a bit of a guessing game for insurers at the moment.
Lloyd’s Plans for Exiting Fossil Fuels
What: Lloyd’s of London, the world’s biggest insurance market, has pledged to stop selling new policies to fossil fuel companies and is aiming to pull out of the industry fully by 2030.
Why it matters: Lloyd’s of London is one of the most influential companies in the world and what they do has ramifications throughout the insurance industry. How will this new pledge affect the reinsurance market and where do they go from here? When do we see an expansion to Personal and Commercial Auto reinsurance? These are a few of the questions we’ll be watching for the answers to.
It’s Now Cheaper to Switch to Renewables Than to Other Alternatives
What: With record-high coal and gas prices, for the first time it is now cheaper to transition from coal to renewables versus coal to gas. A significant contributing factor is the development of renewable technology, which has been steadily getting better and cheaper.
Why it matters: In every sector we’re seeing a shift towards renewables and a decrease in price. Tesla is focusing on this shift in multiple industries and taking an innovative approach towards improving the experience. Their cars, for example, have vertically integrated insurance that joins the servicing and coverage under one roof. It will be interesting to see if Tesla takes a similar approach with their solar power offerings.
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