The insurers fueling climate chaos
State Farm is being "nonsensical at best—and complicit at worst."
A few days ago, news broke that California’s largest insurer will stop insuring thousands of households in the state. Per CBS News:
State Farm will discontinue coverage for 72,000 houses and apartments in California starting this summer, the insurance giant said this week, nine months after announcing it wouldn't issue new home policies in the state.
The Illinois-based company, California's largest insurer, cited soaring costs, the increasing risk of catastrophes like wildfires and outdated regulations as reasons it won't renew the policies on 30,000 houses and 42,000 apartments, the Bay Area News Group reported Thursday.
What this report—and a number of other stories about this announcement—failed to mention is that, by 2019, State Farm had nearly $31 billion in fossil fuel investments, more than any other insurance firm stateside.
Last June the US Senate Budget Committee chair, Sheldon Whitehouse, and two fellow senators1, sent letters to State Farm and six other insurers asking for details about each’s investments in and underwriting of fossil fuel companies and projects, noting that “U.S. insurers currently have approximately $582 billion invested in fossil fuels— with nearly $90 billion in coal alone.”
The senators’ letter to State Farm rightly points out the following:
It seems nonsensical at best—and complicit at worst—for State Farm to carefully factor climate risk from wildfires into its homeowner’s insurance policies, refusing in some cases to provide such policies at all, while apparently ignoring the heightened climate risk that its investment portfolio is helping to create. A recent study by the Union of Concerned Scientists found that 19.7 million acres of burned forest land—37% of the total area affected by forest fires in the western U.S. and Canada since 1986—can be attributed to the world’s 88 largest fossil fuel producers and cement manufacturers.
The Senate Budget Committee sent State Farm another letter, with further questions, on November 1. According to that letter, its investigation into insurance companies’ links to fossil fuels remains ongoing.
Public Citizen aptly sums up the situation in a memo:
Insurers are major contributors to the climate crisis, not only by continuing to underwrite and invest in existing fossil fuels, but by supporting the expansion of fossil fuel production.
As they undermine consumers and their own markets, insurers are creating financial risks that could be passed from consumers and taxpayers to the rest of the economy.
Insurance companies are major contributors to the climate crisis—and therefore the harm to their customers and the chaos in their markets.
Further reading:
Public Citizen’s memo: “Insurers Support Fossil Fuels and Stick Public with the Risk”
And, on
:
“If this were on Wall Street, I’m not sure you’d be able to get away with this”
For Californians now left without fire insurance for their homes, a “last resort” option—the FAIR Plan—is available. But not only is that extremely pricey (trust me, I know—I’m one of their clients), it’s also vulnerable itself. As the LA Times notes:
Funded by the insurers doing business in California, the Fair Access to Insurance Requirement plan [FAIR Plan] provides more limited coverage as a fallback for property owners unable to find conventional policies they can afford.
But the enrollment surge is putting a financial strain on the state insurer as it faces a potential loss of $311 billion, up from $50 billion in 2018.
At a legislative hearing last week, Victoria Roach, president of the FAIR Plan Assn., warned lawmakers that the insurer of last resort had a surplus of only $200 million and was at risk of financial instability should a catastrophic event occur.
The Times quotes California State Assemblyman Jim Woods: “We’re one bad fire season away from complete insolvency — it feels like a big gamble in many ways. If this were on Wall Street, I’m not sure you’d be able to get away with this.”
Insuring climate chaos
In February, a new report from Rainforest Action Network and Public Citizen revealed that at least 35 insurance firms are providing insurance to liquified natural/methane gas export terminal projects across on the US’s Gulf Coast.
Public Citizen has more:
The analysis, based on documents obtained through open record requests, details the insurance coverage for existing and projected methane gas infrastructure that, if built, will export the same yearly greenhouse gas emissions as 239 coal plants.
Read the report: Risk Exposure: The Insurers Secretly Backing the Methane Gas Boom in the US Gulf South
Ron Wyden and Bernie Sanders.
Is there an insurance company with comparable rates that is not as invested in fossil fuels?