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Insurance companies taking too big a risk on fossil fuels, report says The US insurance industry is the second largest institutional investor in oil, gas and coal – but it risks losing money if it doesn’t change its investment strategy


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The US insurance industry, the country’s second largest institutional investor in oil, gas and coal with $459bn in fossil fuel investments, needs to divest or face serious threats to its financial stability, according to a report released Tuesday.

 

The report, funded by Ceres, a Boston-based sustainability advocacy group, analyzes investment data from the country’s 40 largest insurance companies, including Prudential, AIG, Metlife, State Farm and Allstate. The report doesn’t quantify the potential financial losses but points out the economic challenges that have bedeviled the fossil fuel industry, such as low oil prices and the bankruptcy filings of 69 North American oil and gas producers since the beginning of 2015. 

 

Cynthia McHale, the report’s lead author, says the public is largely unaware of the extent of fossil fuel investments by their insurance companies. Poor investment strategies could negatively affect the financial health of insurance firms and their ability to pay out claims to policyholders.

 

“Their policyholders may not feel comfortable with the fact that their insurance company is investing in oil and gas or coal,” McHale said. “Maybe we have more risk here than was previously understood, which in turn affects the capital that these insurance companies need to carry.”

 

 

 

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