Insurers Backing New Oil and Gas Production

Campaign identifies biggest offenders insuring oil and gas; industry continues to exit coal. 

The global insurance industry is currently undermining efforts to meet climate targets by underwriting new oil and gas production, according to the Insure Our Future campaign’s latest research. Focusing on 30 of the world’s biggest insurers’ climate policies, ‘Insuring Our Future: The 2021 Scorecard on Insurance, Fossil Fuels and Climate Change’ was published today as part of Finance Day at COP26 in Glasgow.

Just three of the assessed insurers – French firm AXA, Italy-based Generali, and Australia’s Suncorp – have adopted policies to stop insuring the majority of all new oil and gas production projects, the campaign’s fifth annual scorecard noted.

With just 10 of the 30 assessed insurers controlling around 70% of the global oil and gas insurance market, these firms can have a direct and immediate impact if they adopt new climate policies, the report said.

AXA, Allianz, Munich Re and Zurich, despite being four founding members of the Net Zero Insurance Alliance (NZIA), currently provide more than 20% of all oil and gas insurance. This is despite the fact they have also committed to aligning their underwriting portfolios with a 1.5°C pathway.

“NZIA members have a special responsibility to lead from the front on climate – we call on them and all other insurers to match and exceed AXA’s commitment by ending support for the expansion of all fossil fuel production,” said Lucie Pinson, Executive Director of NGO Reclaim Finance.

AXA’s new policy excludes all new direct investments in listed equities and corporate bonds in developed markets for oil and gas companies. Less than 5% of 650 companies identified in NGO Urgewald’s Global Oil and Gas Exit List meet AXA’s new criteria, the insurer said. However, the new policy also allows AXA to continue insuring more than half of planned oil and gas expansion, the report noted.

US insurers, in particular, are not making as much progress as the rest of the world.

“US insurers continue to underwrite new oil and gas projects and invest in fossil fuel assets that pose a massive risk to the future of the planet, as well as to the insurance industry itself,” said Sheldon Whitehouse, US Senator for Rhode Island.

Speaking to ESG Investor at the COP26 summit’s Green Zone, Peter Bosshard, Insure Our Future’s Global Coordinator, said the limited move away from underwriting or investing in oil and gas projects was particularly disappointing given recent reports from the Intergovernmental Panel on Climate ChangeInternational Energy Agency and UN Environment Programme Finance Initiative (UNEP FI). Each of these reports has warned that a 1.5°C warming scenario depends on no new fossil fuel exploration, he said.

Bosshard is calling for insurers to align themselves with the goals of the Paris Agreement now. “They can’t use engagement or research as an excuse,” he said.

Keeping coal buried

The industry’s exit from the coal sector continues at a promising pace and indicates that insurers have the power and influence to enact positive change at scale and pace, the campaign noted.

Thirty-five insurers covering 50% of global reinsurance markets have withdrawn cover from coal since 2017. As a result, alongside reduced coverage, coal companies are now also facing higher premiums. In 2021, 14 of the 30 assessed insurers have set tar sands exit policies.

While Europe currently leads the way in exiting coal, Asian insurers are starting to follow suit, the report said. For example, Japanese insurers MS&AD and Tokio Marine have committed to ending underwriting for most new coal projects. China continues to lag behind, but the Chinese government’s decision to stop building coal power plants overseas could indicate this is set to change.

Nonetheless, progress still needs to be made, as treaty reinsurance remains a “major loophole” for insurers still backing coal, Insure Our Future warned. Only Swiss Re and SCOR have published plans to phase out coal from their treaty reinsurance business, compared to firms Munich Re and Hannover Re, which have not shared the details behind their plans. Treaty reinsurance refers to insurance purchased by an insurance company that has been issued by another insurer.

“The consensus in the industry is that they can’t touch coal anymore. But they are still short of progress in terms of existing oil and gas,” Bosshard told ESG Investor.

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