Moody's Investors Service has released a paper that makes the case for insurers to remove coal from their activities, saying that such action reduces their exposure to potential climate change liability risk, and reduces the risk of their investment assets becoming stranded.

Citing actions by Allianz, AXA, Swiss Re, Munich Re and Zurich who it states are reducing their underwriting and investment exposure to fossil fuels, and thermal coal in particular, as examples of best practice, the paper notes that by providing less cover to coal and other carbon-intensive industries insurers are reducing their exposure to the legal liabilities that could arise if climate change is established as a cause of specific damaging weather events. However, reducing exposure to coal will limit liability risks prospectively, but these (re)insurers will remain exposed to potential claims that have occurred historically, while insurance coverage was in place.

The paper comes as Marsh, the world’s largest insurance broker, that has been in the process of arranging insurance cover for the Adani Group’s Carmichael coal mine project in Australia, is reported by Unfriend Coal, as considering ending the contract.

For insurers backing coal the bad news has continued, with BlackRock and 2 Degrees Investing Initiative publishing To What Degree? A climate scenario analysis of US insurers’ portfolios that points to US insurers being “severely underinvested” in renewable power, and the portfolios tracking towards a greater than six-degree temperature rise scenario. The reports states, “Renewables make up a very small part of the benchmark but are a big contributor to a two-degree trajectory. Utilities included in the US insurers’ portfolios don’t have sufficient capex spending in renewables to align themselves to a sustainable emissions trajectory.”

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