Coal projects be then power plants or coal mines, are large projects often employing hundreds of people.
As such, the amount of money required to finance the set-up of these things is very big. This means that generally the organisation carrying out the project is required to borrow the money.
All very normal, this type of deal has been going on for centuries. However there’s an issue, the insurer has to work out the odds of you not being able to fulfill your obligations – most common case people have come across is insurance that you have had to buy when you have taken out a mortgage, that will pay off the mortgage in various circumstances such as death or serious illness.
However it is now a scientific fact that one of the highest contributors to the current climate crisis is the burning of coal, and as such the risk of these projects being halted in their tracks or being banned are high. When the odds of an insurer having to pay out increase they have to increase their prices and the market simply cannot cope with that.
As such many coal insurers have simply stopped offering the service. They started in Europe, but now some of the biggest insurance companies in America have started refusing business as well ( including Chubb and axis capital). In all so far 35 insurers have pulled out of the market or severely restricted what they will insure, and between them these insurance companies look after 8.9 trillion dollars worth of assets (roughly 37% of global markets) roughly a 50% increase in a year.
Only Lloyds in Europe will still insure and it is thought that within two or three years it will be hard if not impossible to get insurance for this sorts of projects. It should be noted that while Lloyds is still currently insuring companies, it holds no investments in fossil fuel Industries itself, having sold off the few it had left in 2018. It is thought that Asian insurers will continue to support these projects for a while but it is unlikely that they alone will be able to to give enough support to keep this dirty industry going for long.
Without insurance many projects simply will not happen. There may be some countries in the west where the government steps in to be the insurer of last resort, however it is clear that coal is in the last throes of being used by humans how to make electricity.
Perhaps market forces will Accelerate the move away from fossil fuels after all.
