Insuring Climate Catastrophe: How Big Insurers Finance and Prop Up the Fossil Fuel Industry

Many of us know the names of big insurance companies like Liberty Mutual and Berkshire Hathaway. Some of us may even get our car or home insurance from them. But what’s less widely known is that these and many other insurance corporations play a crucial role in propping up the fossil fuel industry whose carbon and chemical pollution is driving climate destruction and environmental injustice.

Simply put, big fossil fuel operations wouldn’t be possible without the help of insurers. The buildout of oil and gas pipelines, the expansion of coal operations, the performance of offshore oil drilling: all of these operations need to be underwritten by insurance companies in order for them to receive regulatory approval, gain permits, assure investors, and proceed with the extraction, transporting, and burning of fossil fuels. 

And that’s not all: insurance companies are also huge investors in fossil fuels, taking the billions of dollars they rake in through premium payments from clients and then investing that money in the fossil fuel industry. Indeed, one recent report found that insurance companies had over a half-trillion dollars invested in fossil fuels.

In sum, insurance companies fund the fossil fuel industry through their investments and sustain it through their insurance services. All this explains why big insurers have become key focuses for the climate movement. Campaigns like Insure our Future and Stop the Money Pipeline have been pushing insurers to stop underwriting the dirtiest forms of extraction, like coal and tar sands, and also to stop insuring and investing in fossil fuels altogether.

That said, of all the fossil financing “Big Four” — asset managers, big banks, private equity and insurers — insurance companies may be the weakest link. This is because the insurance industry might have the most to lose financially from the climate crisis in the near term. Insurers are already discovering that growing climate catastrophe is cutting off its business in traditional markets and leading to a potential industry crisis. After all, not many people can afford home insurance if there’s a high risk of flooding or wildfire in their area — which, for an increasing number of people, is the case.

Moreover, organizers can gain leverage in pointing out the hypocrisy of insurance companies that invest billions in fossil fuels — and thereby further flaming the climate crisis — at the very same time those same insurers are cutting coverage to people because of the climate crisis.

Insuring and Investing: How Insurance Companies Drive Climate Chaos

The first and primary way that insurers help prop up the fossil fuel industry is through providing insurance for oil, gas, and coal operations. Just as you might need to purchase home or car insurance to cover liabilities in case of accidents or disasters, so do fossil fuel companies when it comes to their operations. 

As two organizers put it in the pages of Rolling Stone, “[e]nergy companies must purchase insurance policies to cover the costs of liabilities if anything goes wrong during development, construction, or operation.” Without this insurance, fossil fuel projects can’t obtain things like permits, regulatory approval, or investor buy-in to move forward.

In exchange for providing insurance to fossil fuel companies, those fossil companies pay insurers big money in premiums, or fees for the insurance coverage. Collecting these premium payments is a key way that insurance companies make profit. Insurers only need to pay out money if successful claims are made by customers they insure — otherwise, they hold on to the premium payments.

Identifying the details around the insurance of fossil fuel operations can sometimes be tricky because there’s a lot of information that is not publicly-disclosed. However, campaigners and researchers have been able to gather a lot of information on what companies are insuring the oil, gas, and coal industry and find specific examples of this.

A 2020 report by Reclaim Finance and Unfriend Coal found that four categories of insurance companies cover the global oil and gas industry: large international multinational insurers and reinsurers; smaller and more specialized property and casualty insurers; Chinese insurers that primarily cover projects with Chinese involvement but which are starting to cover non-Chinese projects; and captive or mutual insurance companies that oil and gas corporations have created.

The report uses findings from the insurance research group Finaccord based on publicly available disclosures and interviews to present three “tiers” made of the top 15 insurers of fossil fuels:

The report also notes that Lloyd’s, the British insurance giant, would fall in the top tier if its several different marketplaces were combined.

More recently, Insure Our Future released a 2022 report that analyzed and ranked the underwriting and investments of 30 leading insurance companies in connection to fossil fuels. U.S. companies AIG, the Hartford, Travelers, Chubb, Liberty Mutual, Berkshire Hathaway, and Starr performed especially poorly on their fossil fuel ties and climate policies, ranking from 14th to 30th. Berkshire Hathaway and Starr were among the companies that had “not taken any steps to restrict their underwriting or investments in fossil fuels,” while Liberty Mutual and Lloyd’s had “taken extremely weak steps to limit their fossil fuel exposure.”

AIG has been a significant focus for climate campaigners. AIG’s most recent annual report touts its “energy-related property insurance products” According to Public Citizen, AIG is “insuring oil and gas projects with abysmal impacts on the environment and Indigenous rights” and “has been linked to the Trans Mountain tar sands pipeline in Canada, which has failed to obtain the Free, Prior, and Informed Consent of all impacted Indigenous communities.” (Read about AIG’s huge fossil fuel investments below).

To get more granular, what are some specific examples of insurance companies insuring a fossil fuel project?

Documents have shown that Liberty Mutual provided a $15.6 million bond to TransCanada Keystone Pipeline to cover risks related to building the Keystone XL Pipeline. Moreover, a 2019 document reveals multiple underwriters providing tens of millions in insurance to the Trans Mountain Pipeline, including Lloyd’s, Chubb, AIG and two Liberty Mutual subsidiaries. It’s unclear who is currently insuring Trans Mountain, though eighteen insurers, including industry giants like AIG, have backed out due to activist pressure which resulted in policies ruling out the expansion of the Alberta tar sands.

The second major way that the insurance industry helps prop up and profits from the fossil fuel industry is through its financial investments. Unbeknownst to many, insurance companies are huge institutional investors, right behind pension funds. They invest trillions of dollars into stock, bond, and other other investments every year.

Insurance companies get their huge pools of investment funds from the premiums they collect from customers. Insurers only need to dole out money on successful insurance claims. Otherwise, after they set aside funds to cover potential payouts, they keep cash reserves from the premiums payments they bring in. Insurance companies invest these cash reserves to bring in more profit.

Of the trillions of dollars that insurance companies invest, hundreds of billions of that goes into fossil fuels. A 2022 report by the California Department of Insurance found that, in 2019 alone, around 1,200 insurance companies invested a whopping $536 billion in oil, gas, coal and utilities, which amounted to nearly 10% of all their assets under management. 

To better understand how insurance companies prop up and profit from the fossil fuel industry, let’s take a specific company: insurance giant AIG. 

According to its 2023 annual report, AIG has $10.357 billion invested in “energy” corporate debt securities. More specifically, according to its most recent filing with the U.S. Securities and Exchange Commission from May 2023, AIG has major holdings in a wide range of specific fossil fuel companies. Here is a table with AIG’s disclosed investments in a dozen of the biggest and most powerful fossil fuel companies in the U.S.:

A July 2022 analysis by Insure Our Future of the data released by the California Department of Insurance (mentioned above) found that AIG and its subsidiaries invested at least $24.2 billion, which amounted to 11.40% of AIG’s company’s assets under management that they analyzed. Other U.S. insurance companies that Insure Our Future looked at also had major fossil fuel investments, such as Berkshire Hathaway ($20.863 billion), Travellers ($4.716 billions), and Chubb ($3.113 billion). 

There’s a stunning callousness in insurance companies’ investing in and profiting from fossil fuels at the same time that they reduce insurance coverage for areas most impacted by the climate disaster. There’s also a stark hypocrisy when insurers’ fossil fuel investments are weighed against their climate gestures. As discussed more below, these tensions offer strategic openings for organizers.

The Fossil Insurers’ Influence Operation

Like other fossil financiers, insurance companies fund industry organizations that carry out massive lobbying operations to represent the broader interests of insurers. Perhaps the most powerful and influential of these is the American Property Casualty Insurance Association (APCIA), which calls itself “the primary national trade association for home, auto, and business insurers.”

The APCIA is governed by representatives of major insurance companies. While its website blocks non-member access to the identities of its board members, the group’s most recent 990 tax filing shows that its directors represent companies like Liberty Mutual, American Financial Group, and many others. APCIA’s President and CEO, David Sampson, is well connected. Before he became a spokesperson for the insurance industry, he served in the George W. Bush Administration as Deputy Secretary of the Commerce Department and as a member of Bush’s Management Council.

Since the beginning of 2022, APCIA has spent an astounding $16,270,520 on lobbying the federal government — and that lobbying activity has been focused on, among other things, in weakening climate legislation.

A May 2022 report by InfluenceMap, a climate think tank, found that “industry associations representing the largest US insurance companies have been actively engaged in efforts to weaken and delay emerging climate-related insurance regulation at both the federal and state levels.” The main lobbying groups it named were the APCIA, as well as the American Council of Life Insurers (ACLI), the National Association of Mutual Insurance Companies (NAMIC), and the Reinsurance Association of America (RAA).

Just to give two of many examples from the report:

• In late 2020, the National Association of Insurance Commissioners, which supports insurance regulators, started to redesign its Climate Risk Disclosure Survey to better align with the Task Force on Climate-Related Financial Disclosures. Insurance organizations lobbied against this, with APCIA and ACLI, for example, opposing Scope 3 emissions disclosures. 

• Connecticut legislators introduced a bill in 2021 that would require Connecticut insurers to disclose their fossil fuel investments and exposure to climate risk. It also directed the state insurance commissioner to report on how climate risk was being accounted for in insurance  supervision and regulation. APCIA, along with NAMIC, strongly opposed the bill, and submitted testimony against it.

Insurance Interlocks with the Fossil Fuel Industry

Big insurance companies also have numerous high-level interlocks with the fossil fuel industry that throw into doubt their capacity to proactively break with oil, gas, and coal interests. A 2021 report by the climate news site DeSmog, for example, found that “just over half of all directors at 30 of the world’s largest insurance companies have affiliations to polluting companies and organizations.”

To see these interlocks in more granular detail, let’s look at one example of an insurance company that is often called out by climate activists: Liberty Mutual. As LittleSis has shown in the past, Liberty Mutual’s board is saturated with fossil fuel interests. For example:

• Liberty Mutual director Jay Hooley is also the lead independent director of ExxonMobil. As of January 2023, Hooley owned 15,500 shares of Exxon stock, worth around $1.6 million at the time of this publication. He took in nearly $300,000 in total compensation as an Exxon director in 2022. Hooley’s role in governing and personally profiting from a fossil fuel behemoth that’s dedicated to expanding oil and gas production egregiously conflicts with his role in governing Liberty Mutual through a future of climate risk.

• Liberty Mutual director Annette Verschuren is a director of Canadian Natural Resources Limited (CNRL), a top Canadian oil and gas producer with major business in tar sands. As LittleSis has previously noted, Verschuren has raked in millions in compensation from her fossil fuel ties.

• Liberty Mutual directors David H. Long and Bill Van Faasen are also directors of utility company Eversource, which heavily relies on fracked gas and a gas pipeline system to provide electricity to customers.

• Liberty Mutual Martin Slark is also a director of Koch Industries, which does major business in the fossil fuel industry and has helped fight climate regulation..

But it’s not just Liberty Mutual. Warren Buffet’s Berkshire Hathaway, which campaigners identify as one of the worst fossil insurers and investors, has major stakes in oil giants Chevron and Occidental Petroleum and fossil fuel investment firm Vitesse Energy. Berkshire Hathaway also has an energy arm that relies heavily on coal. 

Another major fossil fuel insurer, Chubb, has a director who is also an executive at oilfield services giant Baker Hughes and previously worked for an oil pipeline company, a director who also directed Eastman Chemical Company, which does business with the oil industry, and directors tied to major fossil financing banks like Morgan Stanley and Citi, while AIG has a director who also directs oilfield services giant Baker Hughes and previously chaired GE Gas Power.

The ties between the governance of major insurers and the fossil fuel industry — including the fact that insurance directors are also personally profiting from and governing oil and gas companies — are problematic because they cast doubt on the capacity of insurance company leadership to distance the industry from the fossil fuel industry, a separation that’s desperately needed if we hope to curtail the underwriting of climate chaos.

Taking on the Big Fossil Insurers

Dozens of insurance companies have signaled that they’re pulling back from insuring fossil fuels, but the follow-through on these announcements remains to be seen. Indeed, several big insurers recently said that they were pulling back from industry efforts to coordinate net zero pledges. While it remains a daunting challenge to pull big insurers away from the fossil fuel industry, they may be the movable and strategic of all the “Big 4” fossil financiers, with clear vulnerabilities that climate activists can hone in on.

First, the financial bottom line of insurers may be more threatened by climate chaos than other sectors. Why? The insurance industry’s entire business rests on providing services to property owners and businesses across the world, but this business is increasingly threatened by everything from flooding to heat waves to wildfires. Simply put, more and more people will not be able to afford insurance, and insurers will have to increasingly pull back from different services and geographies. In fact, this is already happening in places like California and Florida. All this means that organizers are on firm ground in pressuring regulators and shareholders to force insurance companies to address their complicity in the climate crisis.

Moreover, many of these insurance companies that invest in or insure fossil fuels are consumer-facing. Millions of people get car or home insurance from the likes of Liberty Mutual or Travellers. Many of these customers seriously care about addressing the climate crisis, and they may prefer to do business with companies that are addressing rather than fueling it. On top of this, insurers are subject to a range of state and federal regulatory commissions that are ultimately accountable to the public and can be pressured to increase climate regulation on the industry.

Finally, the pure hypocrisy of insurance companies in continuing to invest in and insure fossil fuel companies that are driving climate crisis while at the same time themselves pulling back from insuring people and property that bear the brunt of that same climate chaos presents strategic openings and conflicts that organizers can exploit. Campaigners should make loud and clear that insurance companies are committing grave abuses against millions of ordinary people by fueling and profiting from climate catastrophe and then pulling vital insurance services away from those same people who are most impacted by climate crisis and need those services most. 

Mazaska Talks, First People’s Worldwide, the Gwich’in Steering Committee and many Indigenous communities directly impacted by oil and gas have been advocating for these insurers to implement Free Prior and Informed Consent policies through a wide ranging array of tactics, such as shareholder resolutions, inside engagement, and direct action and blockades. 

Campaigns like Insure Our Future and Stop the Money Pipeline are working hard to ramp up the pressure on insurers to stop propping up the fossil fuel industry. As climate chaos intensifies, the opportunities to challenge the insurance industry complicity will likely only expand. If you work in the insurance industry, or if you are a grassroots organizer, these organizations would love to hear from you and plug you in.
This fight is far from over, and communities are winning in campaigns to stop the impact of coal, oil, and gas by preventing their insurance. In the last few years they have impacted the global industry, winning dozens of tar sands exclusion policies and creating an insurance crisis for the largest industrial project on the planet. Now they are turning their attention to methane gas expansion, with over 150 organizations coming together to fight the insurance for new liquified natural gas facilities.