International Campaign Urges Reinsurers to Step Away from Coal
Campaigners with Unfriend Coal are at the Rendez-Vous de Septembre trade show in Monte Carlo this week, trying to persuade the world’s biggest reinsurers to stop lending their support to the coal sector.
Because the number of reinsurers in the coal market is so small, “it would only need the withdrawal of the biggest among them to challenge the expansion of the coal sector and hasten its phaseout,” the organization states.
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“Swiss Re, Munich Re, Hannover Re, SCOR, and Berkshire Hathaway are the world’s five biggest reinsurance companies, with a combined 44% of global premiums in 2016,” Unfriend Coal explains. “Together, they have the power to hasten the phaseout of coal and play an important role in the fight against climate change.”
But while Swiss Re has taken the lead, withdrawing support from companies that derive more than 30% of their revenues or power from coal, “other reinsurers such as Hannover Re and Berkshire Hathaway have not restricted their cover to the climate-destroying coal sector at all.” And a new Unfriend Coal briefing finds “major limitations and loopholes” in SCOR and Munich Re’s coal exclusion policies: They mostly exclude existing projects, only apply to specific types of contracts—and even Swiss Re has been vague on whether its new plan applies to treaty reinsurance, in which the reinsurer takes on all the risk a front-line insurer has accepted on a project.
Unfriend Coal explains why that’s a problem.
“In Poland, where 9 GW of new coal capacity is planned, most of the coal projects are directly insured by the local insurer PZU. But PZU needs higher levels of reinsurance than major insurers to offset the legal, financial, and natural risks of coal projects, which can run into billions of dollars. Without access to reinsurance, PZU may not be able to offer cover.”
Enter reinsurers Munich Re, Hannover Re, and SCOR, identified by PZU over the last couple of years as three of its main providers of treaty reinsurance.
“It’s clear that ending direct reinsurance to coal only won’t be enough to stop backing coal expansion in Poland,” writes Unfriend Coal European Coordinator Lucie Pinson. “Beyond Poland, more than 1,200 new coal plants totaling around 630 GW of new coal capacity are currently in planning or under construction worldwide.”
But Dan McGarvey, managing director at New York-based insurer Marsh, commented recently that “the elimination of coal power isn’t just good for the environment…it’s quickly becoming good for the corporate bottom line”. Unfriend Coal adds that reinsurers’ continuing allegiance to coal “is not only a clear violation of the Paris Agreement, but could also be considered a crime against humanity in the near future.”
While “reinsurers are not only the ultimate managers of our society’s risk,” Pinson writes, “they have long been aware of the climate impacts we are experiencing today, and the worsening risks we will face in the coming years.”