Suncorp: The last major Australian insurer supporting new coal

11 April, 2019

One of Australia’s biggest insurance companies has ended up being the last major insurer still open to providing insurance to (underwriting) new thermal coal projects.

Suncorp, which owns brands AAMI, GIO, APIA and Just Car, was put into this embarrassing position after competitor QBE announced an end to its underwriting of new coal projects on 1 July 2019 and a phase-out of its entire thermal coal business by 2030. QBE will also be dumping its coal company shares in its direct investments by 1 July.

Another big competitor, Allianz, does not invest in companies that derive more than 30% of revenue from coal mining or generate over 30% of their energy from coal. Furthermore, Allianz will no longer provide stand-alone insurance coverage for building and operating coal-fired power plants or coal mines and will gradually phase out all coal insurance by 2040.

At Suncorp’s 2017 annual general meeting (AGM), company chair Ziggy Switkowski committed to reduce the company’s fossil fuel exposure in its investment portfolio to an ‘immaterial’ amount over the next two years. At Suncorp’s 2018 AGM, Mr Switkowski affirmed that the company’s responsible investment policy has seen it exit some emissions intensive investments. The terms “immaterial” and “emissions intensive” have not been defined and so it’s impossible to determine how significant these moves are.

While this language – and its climate change “action” plan, published 12 months ago – hint at a transition away from fossil fuels, Suncorp still has no explicit targets or timelines for reducing its coal, oil and gas exposure both in investments and underwriting, in a way that would bring the company into line with limiting global temperature rises as set out in the Paris Agreement.

Bottom of the class

To be fair, QBE and Allianz also can’t claim to have their business aligned with limiting global warming to 1.5 degrees while they both continue to support oil and gas projects. However, these companies have at least taken a first step by ruling out thermal coal. Suncorp’s support for the single biggest driver of the climate crisis now puts it at the bottom of the class.

It makes no sense for a general insurer to be fueling global warming. Floods, fires, cyclones and other natural disasters have cost Suncorp in excess of $2 billion over the last decade and Suncorp has under-provisioned for natural hazards in eight of the last 10 years. In its latest results (covering the six months to 31 December 2018), profit was slashed by 45% year-on-year due to extreme weather events. Suncorp also announced it would allocate an additional $100 million to cover natural hazards in the next financial year. These costs have been shifted onto consumers through a 3-5% increase to premiums.

Insurers have a great deal of collective responsibility and capacity to act on coal, oil and gas. They are not only major investors, but also provide the insurance that is essential for fossil fuel infrastructure to get built.

It is in Suncorp’s – and everyone else’s – best interests for the company to address its contribution to climate change. To align its business with the 1.5 degrees goal, Suncorp must quickly establish a fossil fuel phase-out strategy and communicate a timeline to its customers and shareholders. Not doing so exposes Suncorp to further climate change-related financial risk and the correct perception of Suncorp as a laggard within the insurance market. Although Suncorp is making the right kinds of noises, shareholders and customers are still waiting to see its talk followed up with action.

Take action

Contact all three major Australia-based insurers to outline what they need to do to align their business with a 1.5 degree warming limit: