
Coal power becoming uninsurable as firms refuse cover - 7sigma
https://www.theguardian.com/environment/2019/dec/02/coal-power-becoming-uninsurable-as-firms-refuse-cover
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Arnt
A side note first: Another post quite recently claimed that insurers aren't
refusing coverage totally, but merely reducing their exposure, since
reinsurers are making demands like "no more than 30% of portfolio exposed to
coal". (Double side note: I suppose some insurers set that at zero, for
whatever reason.)

To the main point: What's peculiar about coal? I can see reasons why insurers
might want to avoid or limit exposure to a particular class of risk. But what
makes "coal" into a class of risk, in insurance terms? Why is coal a different
class of risk than, say, mining or construction, which seem similar to me as
naïve layman?

Whether insurers are reducing or avoiding this risk doesn't matter for this
question.

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ZeroGravitas
I think the key idea is systemic risk.

Insurance only works when a percentage of people put in claims, so house fires
across a nation are mostly uncorrelated.

But if there's something that could affect every house and burn them all down
at once, then insurance wouldn't really be an appropriate way to hedge that
risk.

In this case, a coal plant needs to run fairly continuously for decades to be
profitable. The risk is a combination of policy and ever cheaper renewables
making coal economically unviable.

The term usually used is the risk of becoming a stranded asset.

[http://www.lse.ac.uk/GranthamInstitute/faqs/what-are-
strande...](http://www.lse.ac.uk/GranthamInstitute/faqs/what-are-stranded-
assets/)

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Arnt
Are you saying that insurers insure coal plants against being unprofitable?

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cardiffspaceman
Yes. I think that the alternative to an insurance policy would be for the coal
plant operator to make a side bet on solar power, or almost anything other
than a different coal plant. This alternative doesn't have the big payout an
insurance policy would have, but it would provide profits that are not
correlated with the risks of coal plant operation.

