Insurers' Carbon Underwriting Policies

We study the design, determinants, implementation, and real effects of carbon underwriting policies by large insurers. Adoption is more common among insurers from countries with stronger climate policies and less so among specialty and unlisted firms, with coal preceding oil and gas policies. Linking U.S. coal mines to insurers, we show that policy-adopting insurers reduce mine coverage, but implementation is incomplete and heterogeneous. Affected mines are likely to be abandoned and constrained, particularly when access to alternative insurance is limited. Our results are consistent with a simple insurance-supply model augmented with heterogeneous non-actuarial costs faced by insurers.