Some environmental activists have turned to demanding insurers immediately stop underwriting and investing in fossil fuel projects, believing this will help solve climate change.

This is once again misleading and inaccurate—as a lack of insurer investments will not prevent projects utilizing oil and gas from moving forward, and renewable energy would not swiftly enough fill the gap. In fact, insurers’ role is essential as we transition to a lower carbon economy, including supporting risk mitigation and investing in and insuring climate and renewable energy technologies.

Related article: Viewpoint: Why Activists Should Rethink Hard Insurance Exits From Fossil Fuel Underwriting

According to recent estimates from the Biden administration’s U.S. Energy Information Administration (EIA), a branch of the U.S. Department of Energy, petroleum and natural gas are expected to remain the most consumed sources of energy in the United States through 2050 and total energy consumption is expected to grow up to 15 percent over this time. No amount of wishful thinking can change the fact that traditional forms of energy production will continue to power our daily lives for decades to come.

This is the energy that most often provides heat and light for homes and schools, power for hospitals, and fuel for our transportation needs. That energy cannot simply be replaced today, tomorrow or even in the next 20 years without significant disruption to the safety and well-being of Americans. And this reality is certainly not the fault of, nor caused by, insurers. In fact, due to the current backlog in interconnection requests and other technological or procedural hurdles, new renewable energy projects now take nearly four years to become operational after an initial interconnection request is filed. While certainly part of the solution, renewable energy is not an overnight solution.

Further, the idea that without insurance, new fossil fuel projects would come to a halt is also misguided at best. Without insurance, this energy production would continue but without the risk protection that safeguards communities and workers. The global thirst for energy is immense and any shortfall in domestic production would be quickly filled by state-controlled international energy companies that may not have comparable environmental protections, or concerns for the well-being of Americans.

Insurers play a critical role in preventing accidents through the underwriting process, which facilitates safety, loss control, risk identification and mitigation controls. If fringe activists got their way, an abrupt end to insurance coverage would likely increase the risk of environmental disasters and could trigger catastrophic impacts, severely affecting communities, businesses and the U.S. economy. Insurers pulling out of fossil fuel initiatives wouldn’t stop them from moving forward, but such a drastic move could eliminate safety protocols and drive up energy costs for consumers.

The claim that insurers are a barrier to a cleaner energy future is also being misrepresented by environmental activists. Although there will continue to be a reliance on fossil fuels for the foreseeable future, insurance companies support the rapid deployment of low-carbonand zero-emission sources of energy, as well as additional investment in our power infrastructure. As renewable sources are expected to supply roughly half of U.S. electricity generation by 2050, this unprecedented transformation of the nation’s power grid will create new risks and vulnerabilities, many of which are considered by and managed by insurers. The need for risk transfer products for renewable energy facilities and technologies, such as solar installations and electric vehicles, is only expected to grow—and insurers will continue to underwrite those, as well.

Let’s also set the record straight about property/casualty insurers’ investments. Property/casualty insurers maintain substantial diversified investments to pay for future claims, of which only a small fraction is in fossil fuel-related assets. Notably, property/casualty insurers’ investment in green bonds more than tripled in a single year from 2018 to 2019.

Each insurer manages their own investment strategy, and, like any sound financial manager, property/casualty insurers hold diversified assets that allow them to pay for their long-term commitments given a broad range of risks and outcomes. This diversity in investment approaches provides strength and stability to the property/casualty industry. In 2022, the U.S. experienced the second worst catastrophe losses ever, almost $100 billion in insured losses. Due to a robust and resilient investment strategy, the industry fulfilled its commitments to policyholders.

The overall baseless rhetoric from some activists also fails to acknowledge the myriad reasons for insurers limiting exposure in high-risk areas, including increasing populations moving to and building properties in high-risk areas, unfavorable regulatory environments that delay or inhibit insurers from collecting adequate premiums to cover the risk, legal system abuse, 40-year record high inflation, and other factors.

Insurers are acutely aware of the impact of more severe weather on communities. Insurers are advocating for investments in mitigation techniques as population, housing and business growth in hazard-prone areas increases. Insurers are working with policymakers to strengthen building codes, improve land-use planning, develop more resilient infrastructure and reduce fuel load in areas at risk for wildfires.

These are tangible actions taken by insurers that recognize the need for resiliency and investments in safer energy production in the face of climate-fueled disasters. Ceasing to underwrite oil and gas activities, as the activists are demanding, does the opposite.