by Dr. Lars Schernikau: Energy Economist, Commodity Trader, Author of recent book “The Unpopular Truth… about Electricity and the Future of Energy”
When we picture the energy world, most of us think of oil rigs, coal plants, solar farms, or offshore wind turbines. Rarely do we think about the quiet force that makes all of this possible… insurance.
Insurance isn’t just about protecting us from loss, it is also the very foundation that allows industries to exist. Banks won’t finance a ship, a mine, or a power plant unless someone is willing to underwrite the risk.
Without insurance, there is no large-scale financing. Without financing, there is no infrastructure. And without energy infrastructure, there is no modern life.
The shifting landscape of energy insurance
Over the past decade, banks and insurers have been under intense pressure to withdraw from coal, oil, and gas. ESG commitments, climate pledges, and reputational risks pushed them away from the very industries that still today, provide more than 80% of the world’s energy.
The “Net-Zero Banking Alliance” NZBA and “Net-Zero Insurance Alliance” have “suffered” substantial draw backs with more and more institutions suspending memberships. In fact, The UN banking alliance NZBA was finally suspended as big members exited (late-2024/2025) and as withdrawals by US industry leaders and later HSBC, UBS, Barclays and others, hammered the proverbial nail into the coffin.
But reality has a way of asserting itself.
Energy crises, geopolitical shocks, and the simple fact that wind and solar simply cannot supply reliable and affordable energy, have led to a reset in 2025. Insurers and financiers are beginning to return to the market of conventional energy, cautiously, selectively, and often under stricter conditions, but undeniably returning.
Rising risks and but also rising perspective
“Extreme weather events” dominate headlines and insurance risk reports alike. Catastrophes sell papers and today, they also sell policies. Hurricanes, floods, and wildfires, all are presented as proof of looming climate disaster.
The numbers, however, reveal a more nuanced picture.
Although, insured losses from natural disasters have exceeded USD 100 billion annually for several years, against the backdrop of global premiums of around USD 7.5 trillion in 2024, these catastrophe losses usually amount to just 1–2% of global premiums. In fact, both 2023 and 2024 were highly profitable years for the insurance industry despite the “noise”. The bigger picture becomes even clearer when you normalize losses to GDP, showing relatively speaking, societies are becoming safer, not riskier.
Figure 1: 10-year catastrophe losses, insured and uninsured |Source WEF
At the same time, the “green” energy projects that are supposed to save us from climate change are proving tricky to insure. Solar panels shattered by hail. Wind turbines struck by lightning. Offshore farms battered by storms and requiring costly repairs. Premiums for wind and solar projects are climbing… in some cases faster than those for conventional energy projects.😉
Figure 2: Global Weather Disaster Losses as % of GDP until 2024. Source: Prof Pielke
The unpopular truth
The unpopular truth is that we cannot insure or finance a future that does not yet exist. The world still runs on coal, oil, and gas. Pretending otherwise risks undermining energy security, supply chains, and basic human wellbeing.
We must start by being honest, supporting conventional energy responsibly, investing in making our current energy supply cleaner, and avoid turning insurance into a political weapon rather than the economic tool it is meant to be.
Why this matters
Insurance is not just a financial safety net, it is one of the hidden levers of civilization, a driver of global industry. The way insurers and banks act today will contribute to what kind of energy future we can actually build tomorrow.
At its core, the debate on energy is not confined to technology and emissions, but it includes the topic of risks that are insured and those that have to go without… those that qualify for financing and those that fall short.
For the full scoop on insurance and financing link, here my blog post: Insurance and Financing, Energy and Life
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But that would require eliminating political parties from the equation, since they are unable to function without lying to the populace.
Is that a function of the ‘R’ and ‘D’ labels, or is it a function of the election process?
It is a function of politics in general and the never-ending quest for (political) power.
And let’s be honest about insurance. It doesn’t protect anyone from loss. If a loved one dies, and they have insurance, in what way was anyone “protected”? If your house goes up in flames, you weren’t “protected”. Your house might get rebuilt, but the irreplaceable items that were lost remain lost, and the tremendous pain and suffering of losing your house and getting it rebuilt (just ask Californians) is not “protection”.
Great point. I hear commercials that say their insurance products “protect.” I don’t believe it.
I agree, but insurance (a socialist concept) does offer some financial “protection” it the monetary compensation, such as it is, for the loss. Never expect 100% compensation.
I think the correct way to look at it is that insurance protects you from (some of) the consequences of loss. 20 years ago, when I had maybe 25 years of income-producing activity still ahead of me, and as the primary breadwinner, life insurance potentially protected my family from having to sell the house, drop out of school, etc. if that income stream was lost through my death.
Yep, insurance won’t necessarily replace what was lost, but it can minimize the bad consequences of the loss.
And what about motor car insurance?
The way insurers and banks act today
Is suspect. Car insurance goes up by leaps and bounds. Banks check your thoughts…
Nigel Farage Coutts bank scandal
Another view is that the cost to rectify a bad event is increased by a rather large amount of you take the insurance option. You are paying for a big overhead that is the huge global infrastructure of insurance workers housed in often expensive buildings plus related activities like using your premium money for their investments and banking partnerships.
Personally, I gave up all non-compulsory insurance decades ago, did my own thing and am streets ahead financially.
Giving your money to strangers in case something happens is like paying your money in taxes and charges for climate change in case climate changes. Is it just a big rip off? Geoff S
Mathematically it must be a bad deal on net. However, it would be awful to be the one-in-N who would have benefitted if only…
Kevin,
I see it as awful to pay regular insurance premiums knowing the odds are high that you will get zero benefit from the expenditure.
Tip. While driving, keep a proper distance from the car ahead. I’m just back from Melbourne airport to home, about 35 km, FOUR long delays on 3 to 5 lane expressways with nose-to-tails of 7, 5, 4 and 3 vehicles. I keep a space ahead because I am not insured except for compulsory third party. Geoff S
It’s reverse gambling. You’re still laying money down against a statistically rare event, only it’s one you don’t want to happen.
An insurance company is betting the bad will not happen but the person is betting it will.
How insane is that?
Top 10 list of tallest building nameplates in every major US city is a who’s who of insurance. In some cities, the ONLY tall building is the one headlined by the insurance co.
Story Tip: https://www.breitbart.com/tech/2025/09/18/upenn-stands-by-climate-alarmist-michael-mann-who-called-charlie-kirk-head-of-trumps-hitler-youth/
Maybe this will get Mr. Mann another step closer to the orange jumpsuit he deserves…
That just provides more evidence of what a scumbag Mr. Mann is (as if we needed more).
The real point is that government shouldn’t be in the business of picking winners and losers. Fossil fuel and nuclear businesses broke no laws to deserve this kind of treatment. On the contrary it is the organizations working to prevent the fossil fuel and nuclear companies from getting loans and insurance who are the law breakers. If not for a spineless ignorant government this movement wouldn’t have even come into existence.
Large entities self-insure some things, Boeing and Microsoft on employee health I recall.
(They may hire an outside outfit to manage claims.)
Nice post! Its interesting that the insurance companies as a whole are doing well during this purported “climate crisis” — laughing all the way to the bank! I would laugh too, but like others I am paying higher insurance premiums (to protect my financial status).
The climate alarmist mafia in government threatened banks & insurers not to do business with the Oil/gas industry which mainly handicapped the smaller companies. Large publicly traded entities like Chevron & Exxon could sell stock and self finance for exploration, production or buying-out the little guys.