As wildfires scorch California, should insurers divest from fossil fuels?

As catastrophic wildfires spur insurance companies to raise homeowner premiums and drop thousands of policyholders across California the industry has blamed context change for fueling the blazes Yet even as insurers sound the alarm about a warming planet they continue to invest billions of dollars in the oil and gas sector which scientists identify as the main driver of rising global temperatures as burning fossil fuels releases heat-trapping carbon gases into the atmosphere In up-to-date years lawmakers environmentalists consumer advocates and California s former top insurance regulator have pressed insurers to divest from fossil fuel companies and phase out writing coverage for oil wells coal mines and other extraction projects They argue doing so is critical to accelerate a transition toward renewable vitality and protect the insurance region from total collapse The California Department of Insurance led by Commissioner Ricardo Lara revealed it has no plans to pursue regulation to force insurers to divest But Lara s predecessor Dave Jones contends that insurance companies investing in fossil fuels is like pouring gasoline on a wildfire Insurance companies are telling homeowners and small business owners across the United States they need to increase rates or solely can t write or renew insurance coverage announced Jones insurance commissioner from to And that s driven substantially by oil and gas companies Insurers invest the premiums they collect from policyholders into stocks bonds and other assets to grow profits and maintain sufficient funds to pay customer maintains That s crucially pivotal following natural disasters such as January s Los Angeles wildfires which caused tens of billions of dollars in losses Insurance industry functionaries say carriers hold what they describe as a small portion of assets in oil and gas as part of a diversified capital strategy They say those investments are no different than those of general pension funds nonprofit endowments mutual funds or individual retirement accounts though chosen large investors including the University of California have moved to divest from traditional force companies They all have fossil fuels because consumers buy fossil fuels and it creates a return on outlay declared Seren Taylor vice president for the Personal Insurance Federation of California an industry group Taylor explained divestment would jeopardize those returns which are factored into the premiums insurers charge property owners That s just asking to raise rates on people he stated In a comment Jim Stanley a spokesperson for the Western States Petroleum Association dismissed calls for divestment as out-of-touch stunts that if implemented would kill jobs and increase the cost of living by driving even more insurance and power companies out of state Since bulk insurance companies don t have to publicly analysis their stake portfolios it s unclear how much the industry holds in non-renewable potency assets However according to an analysis by S P Global the U S insurance industry in invested at least billion in fossil fuels in turn helping oil and gas companies finance their operations California s largest home insurer State Farm this year announced owning at least billion in stocks and equities according to its latest quarterly disclosure filings with the Securities and Exchange Commission The company invested almost billion in oil and gas making up about of its publicly traded equities a Bay Area News Group analysis of the filings exposed According to the filings State Farm owns stock in Chevron Exxon Mobil and Shell among other fossil fuel-related corporations The company is required to disclose its stock holdings because it s considered a large institutional investor State Farm did not respond to questions about its fossil fuel investments Consumer advocates argue it s hypocritical for insurers to profit from those investments while citing conditions change to raise rates and cancel coverage They say forcing carriers to divest is a necessary step toward mitigating the wildfire risks now costing policyholders If we get the insurance industry out of the fossil fuels business we are moving to a more sustainable future and that will save consumers money noted Carmen Balber executive director of Los Angeles-based Consumer Watchdog Selected experts meanwhile say that instead of demanding that insurers sell their stake in fossil fuel companies advocates and policymakers should focus on modernizing regulations to persuade insurers to expand coverage in fire-prone areas We purely cannot afford to irritate companies that are still in the California insurance region over this kind of thing when we urgently need them to write policies Michael Wara a context approach researcher with Stanford Law School commented in an email Related Articles New California laws aim to ease ongoing home insurance emergency AI-powered Bay Area home insurance startup expands in risky markets Ghost networks How insurance errors endanger California patients Check out various wildfire-related bills that Gov Newsom signed last week New California law aims to stabilize homeowner insurance for people who can t get private coverage Even so the residents pressure appears to be contributing to selected insurers decision to scale back their exposure to oil and gas holdings revealed Michel L onard chief economist at the Insurance Information Institute an industry-backed group In modern years large European insurers including Allianz and Munich Re have committed to restricting petroleum investments and their underwriting of extraction projects In the U S State Farm and Farmers which together account for about a third of homeowner polices in California have reduced the share of traditional capacity investments in their stock portfolios by about half over the past decade according to the Bay Area News Group analysis The analysis unveiled Farmers had million invested in oil and gas stocks a little over of its equity portfolio The company did not return a request for comment There s a concern among almost all actors that these industries aren t sustainable in the long term commented L onard adding that renewable vigor sources are proving increasingly lucrative But according to Jones the former insurance commissioner that shift isn t happening fast enough He wants to see California and other states follow through on past efforts to require insurers to disclose their fossil fuel holdings He also urged lawmakers and regulators to compel insurers to transition out of oil and gas investments and underwriting and clear the way for carriers to sue fossil fuel companies to cover wildfire losses Jones noted that if the insurers society s primary liability managers exited fossil fuels other large investors would likely follow putting pressure on the potency industry to focus on renewables It would send a very strong signal he revealed that there s an critical transition underway away from fossil fuels