In today’s interconnected world, nothing of significance happens without insurance. While often associated with personal matters – such as driving a car, building a home, or securing health and life coverage – the role of insurance extends far beyond the individual. Industrial insurance is a foundational pillar of the global economy. Without it, many industries, particularly energy, would be unable to operate at scale. Why? Because without adequate risk transfer mechanisms, banks cannot finance these ventures.
When an insurer or financial institution declares, “We will no longer fund coal or gas,” it is not merely making a business decision – it is implicitly advocating that no one should.
The past decade has been turbulent for the insurance and financing of industrial energy activities. It is essential to acknowledge that over 80 % of global energy consumption still derives from fossil fuels – namely oil, coal, and natural gas. Despite the global push toward decarbonization, these sources remain indispensable to modern life.
When an insurer or financial institution declares, “We will no longer fund coal or gas,” it is not merely making a business decision – it is implicitly advocating that no one should. If such a stance were universally adopted, the consequences would be immediate and severe:
- Industrial operations would halt, disrupting supply chains and manufacturing.
- Energy shortages would emerge, particularly in regions already lacking robust infrastructure.
- Human lives would be at risk due to the loss of heating, food production, and essential services.
Despite two decades of investment in the energy transition, wind and solar still represent a small fraction of the total energy supply. Their low energy return on investment (eROI) and intermittency limit their ability to replace dispatchable conventional sources at scale.
This week, a significant yet largely underreported development emerged: Lloyd’s of London announced that “the Corporation would no longer discourage insurers operating in the market from underwriting coal and other fossil fuel projects” (The Guardian). This marks a notable shift from the restrictive tone of the past decade and signals a broader recalibration toward energy realism – one that seeks to balance climate commitments with energy security, economic stability, and regional development needs.
Importantly, supporting conventional energy does not preclude investment in renewables. The path forward lies in a balanced strategy:
- Continue underwriting and financing reliable energy systems, including coal and gas, where appropriate.
- Invest in R&D for high-density, sustainable energy technologies.
- Support transitional models that blend conventional and scalable sustainable energy sources.
By doing so, insurers and banks not only fulfill their commercial mandates but also uphold their role as enablers of societal resilience and human prosperity.
