A recent proposal in the New York Legislature aims to prevent insurance companies from operating in the state if they provide coverage to businesses generating more than 10 percent of their revenue from fossil fuels. However, there are concerns that this bill could have unintended consequences, potentially leading insurers to exit the state rather than lose out on profits.
The proposed legislation mandates that within five years of implementation, insurers must certify that they have divested from companies heavily involved in activities related to oil, natural gas, coal, and their byproducts. It also requires insurers to disassociate from projects that support these industries.
Similar efforts are being made in other states, such as Connecticut, where discussions have taken place about imposing fees on insurance companies covering fossil fuel projects.
The goal of these laws is to undermine the financial support for fossil fuel companies. The New York bill specifically targets insurers of fossil fuel projects like pipeline construction and natural gas power plants, potentially excluding them economically from the state.
Pete Sikora, a climate director at New York Communities for Change, believes that insurance could be a powerful tool in limiting oil and gas projects, stating, “No insurance, no projects.”
State Senator Brad Hoylman-Sigal, one of the bill’s sponsors, acknowledges the significant impact insurance can have, calling it a “powerful cudgel.”
While the legislative session in New York has ended for 2024, the bill’s fate remains uncertain. If passed, it could lead to higher insurance costs for energy production and potential project implementation without insurance coverage.
Dave Snyder, Vice President of the American Property Casualty Insurance Association (APCIA), warns that making insurance inaccessible for fossil fuel-related projects could remove crucial protections, rather than halting the projects altogether.
Given the financial allure of the fossil fuel industry, the “Insuring Our Future Act” in New York may force insurance companies to choose between exiting the industry or the state, with many likely opting for the latter.
Despite efforts to reduce reliance on fossil fuels, they continue to play a significant role in the U.S. energy sector. Insurance companies have substantial investments in these industries, making it a challenging decision for them to align with the proposed legislation.
The potential repercussions of this bill could impact New York businesses more than fossil fuel companies, should insurers decide to withdraw from the state.
However, there are doubts about the bill’s passage, with some experts questioning its feasibility and potential opposition from the Governor.
The sponsors of the bill, Hoylman-Sigal and Rep. Phara Souffrant Forrest, have not provided immediate comments on the proposal.
