In short:
- Insurers benefiting from Flood Re, which improves availability of flooding insurance, are providing cover for coal mines and gas terminals
- Four Flood Re insurers, including Aviva, have $20bn invested in coal, oil and gas companies
- Responding to the revelations, cross-party MPs called for reform of the government and industry scheme
Climate change is bringing extreme weather to the UK. Thunderstorms at the end of a scorching summer have caused flash floods and the country is now bracing for a season of potentially devastating rainfall. While homeowners could face the trauma of fishing their belongings out of foul-smelling water, they may be stunned to find the insurers helping them mop up are fuelling the climate crisis.
Major insurance companies are protected from flooding losses by a government and industry scheme paid for by everyone in the UK who insures their home. The Bureau of Investigative Journalism reveals that some of those same insurers are underwriting and investing in coal, oil and gas projects that are driving catastrophic climate change. MPs from across the house and campaigners are understandably furious.
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Support independent eco journalism that drives real change.Adrian Ramsay, Green MP and member of the Environmental Audit Committee, said:
“Insurers cannot take money from a government-backed scheme designed to protect people from flooding, while actively financing the fossil fuel expansion that makes those floods worse and more frequent.
“Government must use the ongoing reform of Flood Re to make sure insurers benefiting from public-backed flood cover aren’t simultaneously fuelling the crisis behind it.”
Chris Hinchliff, Labour MP for North East Hertfordshire, said it was “mind-boggling” that insurers who face huge liabilities due to increasing flood risk were investing in activities that could “collapse their entire business model”.
The news comes as finance and insurance experts, together with the campaign group Mothers Rise Up, publish an open letter to the government and regulators, demanding reforms to the Flood Re scheme.
A raging torrent
Heather Shepherd lives outside Shrewsbury near the junction of two rivers that regularly overwhelm their limited flood defences.
“You can hear it in the house. It sounds like a raging torrent, and you know that is heading towards you. It’s really quite scary.”
When the water reaches her home, it starts trickling in.
“It just keeps slowly rising and rising. You daren’t go to bed.”
Heather then faces several days of wading through dirty water in her own home.
She is just one of 11.3m people in the UK that the Environment Agency estimates live in areas at risk of flooding – a figure expected to grow as temperatures continue to climb. A warmer atmosphere holds more moisture, causing heavier downpours and more flooding.
Heather’s insurance premiums rose dramatically post-flood but she can still get cover backed by Flood Re. The government and industry scheme creates a pot of money with a levy on every UK home insurance policy. Insurers that choose to take part can use that money to cover claims from floods. Flood Re estimates that it backs 353,000 insurance policies across the country.
The project’s aim was to stop insurers abandoning swathes of the country that regularly flood. People rejected for insurance on their homes can’t easily sell them, making Flood Re a vital tool to avoid a housing crisis.
For Heather, the introduction of Flood Re was a “massive relief”. But she is horrified that insurers benefiting from the scheme are exacerbating climate change.
“It’s horrendous,” she said. “While their losses are being covered, they’re becoming a softer voice as well. We need the strength of insurance companies to push government to be more proactive around climate change.” Instead, some appear to be backtracking on their own green pledges.
Backtracking and bankrolling
Using Freedom of Information requests, the Bureau found Allianz, Axa, Zurich and Chubb – all part of the Flood Re scheme – are providing cover for coal mines and new gas terminals in the US.
Four of the biggest players in the programme, including Aviva, also have $20bn invested in coal, oil and gas companies, according to an analysis of data from the campaign group Urgewald. Scientists are clear that burning fossil fuels drives climate change, which causes more and more extreme weather events.
Axa told us it has been “evolving its investments in the energy sector by reducing its exposure to fossil fuels and accelerating its investments in clean energy” for more than 10 years.
Allianz said it continued to reduce its fossil fuel investments and declined to comment on client relationships.
None of the other companies in this story responded to our requests for comment.
Flood Re said it is not funded by taxpayers and there is no financial liability for the government. A spokesperson said: “Our remit is flood reinsurance. We have no role in or control over the wider investment or underwriting strategies of individual insurers.”
The Association of British Insurers, a trade body, said: “Insurers will make their own commercial decisions in line with their climate commitments. We would generally expect these to be consistent with each firm’s long-term targets and transition plans.
“However, decisions about whether or not to offer cover for energy projects will also carefully consider potential implications for workers and the local community.”
That is little comfort for Heather, whose home first flooded in 1998 when she had two young children. “I remember standing there, looking at this devastated house and thinking, ‘Where do we go now? Do we go and sleep on the park bench?’ It brings on almighty depression.”
She is resigned to what lies ahead:
“Once you’ve flooded, flooding’s permanently on your mind.”
