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Insurer Chubb to stop covering coal mining and thermal power plants

 

Date | July 02, 2019:

Chubb Ltd, one of the largest US based insurer has decided to stop covering thermal power plants, their construction and coal mining. Existing covers on these assets will be phased out by 2022, it said in a recent statement.

 

Few years ago, large foreign banks decided to stop financing coal fired power plants as well as coal mining following which a few Indian banks backed out from financing overseas coal mining projects of Indian companies.

 

The largest Indian coal producer, Coal IndiaNSE 0.16 %, has not faced any such issue so far as its reserves are adequate to finance its own projects. However, the company is on the look out for coking coal assets overseas in countries including Australia, Canada, Russia and the US. State owned NTPC, which generates bulk of its power from coal fired plants procures finances from Indian banks.

 

In a statement Chubb Ltd said that it has adopted a new policy concerning coal-related underwriting and investment.With the new policy, the company will no longer underwrite the construction and operation of new coal-fired plants or new risks for companies that generate more than 30% of their revenues from coal mining or energy production from coal.

 

Chubb was present in India till 2007 as a 26% partner in HDFC’s insurance arm.

 

“Insurance coverage for existing coal-plant risks that exceed this threshold will be phased out by 2022, and for utilities beginning in 2022. In addition, Chubb will not make new debt or equity investments in companies that generate more than 30% of revenues from thermal coal mining or energy production from coal,” the statement said.

 

Chubb is possibly the first foreign insurer that has decided to stop to covering coal-based projects and mining.

 

"Chubb recognizes the reality of climate change and the substantial impact of human activity on our planet," said Evan G. Greenberg, chairman and CEO of Chubb in the statement."Making the transition to a low-carbon economy involves planning and action by policymakers, investors, businesses and citizens alike.The policy we are implementing today reflects Chubb's commitment to do our part as a steward of the Earth."

 

The new policy adopted by the insurance major includes refraining from underwriting new coal plant construction and operation.Chubb will not underwrite risks related to the construction and operation of new coal-fired plants.Exceptions to this policy will be considered until 2022 in regions that do not have practical near-term alternative energy sources, and taking into account the insured's commitments to reduce coal dependence.

 

Chubb will not underwrite new risks for companies that generate more than 30% percent of revenues from thermal coal mining. Chubb will phase out coverage of existing risks that exceed this threshold by 2022.

 

For utilities, Chubb will not underwrite new risks for companies that generate more than 30% of their energy production from coal.Chubb will phase out coverage of existing risks that exceed this threshold beginning in 2022, taking into account the viability of alternative energy sources in the impacted region.

 

Chubb will not make new debt or equity investments in companies that generate more than 30% of revenues from thermal coal mining or that generate more than 30% of energy production from coal.

 

Chubb claims that its new coal policy is expected to have a de minimis impact on premium revenues and no impact on investment performance.

 

 

(Source: https://economictimes.indiatimes.com/)