Reinsurers plan to get rid of coal from wholesale purchasing policies as part of green gamble
- Swiss Re plans to change the “treated” coverage
- Hannover Re, Munich Re analyzing the next steps
- Occurs as the sector faces pressure to act on the climate
LONDON, June 17 (Reuters) – Major reinsurers have already pulled out of providing tailor-made cover for coal projects as part of efforts to meet global climate change commitments, but now comes the part la more difficult – find ways to exclude coal from wholesale purchase contracts, known as “conventional” reinsurance.
Reinsurance companies help share the burden of insurance risk by underwriting frontline insurers. The restrictions they impose will have an impact on the insurance policies offered to businesses.
Most reinsurers have stopped offering insurers tailor-made or direct coverage for coal projects, but many still underwrite the industry through conventional reinsurance, where hundreds of insurers’ policies are grouped together.
The process of unbundling reinsurance from treaties to seek exposure to coal is difficult, but pressure is mounting on the industry from investors and regulators to do more to reflect the growing risks of climate change in the world. their way of subscribing. Swiss Re (SRENH.S) is already doing this. If more reinsurers reduce this coverage, specialist commercial insurers such as those operating in the Lloyd’s of London market will feel the impact, as will suppliers to the coal industry or companies that derive even a small portion of their income. coal. “The first consequence is that insurance is more difficult to obtain, the second consequence is that it is expensive, the third consequence is that there are all kinds of caveats about it and in the extreme, you you might not afford it, “said Paul Merrey, insurance partner at KPMG. . Last month, for example, a rail contractor in the Australian coal project giant Adani Enterprises (ADEL.NS) asked the Australian government to help him get insurance he couldn’t get from the market. Read more
Five of the six largest reinsurers in the world – Swiss Re, Munich Re (MUVGn.DE), Hannover Re (HNRGn.DE), SCOR (SCOR.PA) and Lloyd’s of London (SOLYD.UL) – have already reduced their coverage on measurement for coal projects. But only Swiss Re, in a statement released in March, said it would go further and tighten its stance on treaty reinsurance.
Munich Re and Hannover Re told Reuters they are working with their insurance clients to further reduce their own exposure. “We want to keep the dialogue going and drive change together,” said Jean-Jacques Henchoz, Managing Director of Hannover Re, adding that: “It doesn’t happen in a few weeks, it takes a bit of time.” Munich Re and Hannover Re said they were looking to assess what was in their treaty reinsurance books. “For coal, we are very confident that this is something that we will get transparency on, but of course it is much more difficult than doing it for the direct and optional activities,” said Michael Menhart, responsible for economics, sustainability and public affairs at Munich Re. Optional refers to single risk coverage. Lloyd’s of London, which has around 100 union members and first launched a coal strategy last year, said via email it would produce new guidance later this year. Scor did not respond to a request for comment.
For the global reinsurance industry as a whole, conventional reinsurance typically accounts for the majority of business in the over $ 500 billion market, according to industry sources.
Swiss Re has announced that it will introduce thermal coal exposure thresholds in its treaties with insurers as a first step towards full elimination by 2040, although it has not yet specified the thresholds. “We have worked internally with treaty offices around the world to understand their coal exposures,” said Martin Weymann, Head of Sustainability, Emerging Risk Management and Policy at Swiss Re. time to filter out the most exposed risks. ” Hannover Re’s Henchoz said that in terms of excluding coal from treaty-related matters, it was important to scratch below the surface and try to be very concrete on how to achieve an official goal. Lloyd’s, who, according to industry sources, tend to be more cautious than major European reinsurers about taking climate action, said its members were moving away from fossil fuels. Lloyd’s said the market wanted “to make sure that existing customers have time to transition their businesses and that we don’t create unnecessary cliffs.” The ShareAction lobby group said in a recent report that the fact that conventional reinsurance could provide coverage for coal risked undermining progress in restricting tailor-made coverage. Even if more major reinsurers decide to end conventional coal coverage, the impact could take some time to fully ripple through the system as other reinsurers seek to take over. “In the short term, there could be some opportunistic players,” said Weymann of Swiss Re, adding, however, that shareholders are leading the push for longer-term change.
Isabelle Santenac, global insurance leader at EY, however, said that rather than exclusion, the industry should instead use its influence to engage with corporate clients to help them make the transition to an economy faster. greener.
“If you stop working for these companies, these companies will find another insurer to cover that risk, and then you can say ‘what has changed for the planet? Nothing’.”
Additional reporting by Jonathan Stempel in New York. Editing by Jane Merriman
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