@Pixabay.
Surprising entries onto the nice list by some insurers due to their actions on fossil fuels in 2024 have not stopped the annual naughty list of insurers underwriting/investing in fossil fuels from staying the much larger of the two.
A report “Within Our Power” launched on Tuesday said the insurance industry was still made up of many laggards on fossil fuel and should use its sway to do more to aid transitions away from the most harmful emissions.
The findings could see more pressure on insurers around both their investments and underwriting operations. These could also see them have to reconsider strategies as climate change events continue to add risk to financial decisions.
The report was published by Insure Our Future, an international campaign calling on insurance companies to exit coal, oil and gas and accelerate a just clean energy transition – in line with a pathway limiting global warming to 1.5°C.
Key findings of the report were that over one-third of weather-related insured losses over the last two decades, totalling $600 billion, have been attributed to climate change.
“New analysis that applies peer-reviewed climate attribution science to industry loss data from Aon, Gallagher Re, Munich Re, Swiss Re, and Verisk reveals the massive scale of climate-driven costs that insurers are passing onto communities,” said the report. “This $30 billion-dollar average annual toll – just the tip of the iceberg of rising climate impacts – demands that insurers and their regulators confront fossil fuel emissions as a root cause of the escalating insurance crisis.”
"AXIS Capital, Aviva, and Munich Re are the only major insurers [that] write
more direct premiums for renewable energy than fossil fuels.”
Other key takeaways from the report included that despite widely publicised progress, the renewable energy insurance market is still under 30% of the size of the fossil fuel insurance market in 2023, which is “threatening to be a bottleneck for clean energy Investments”.
The report comes a month after Donald Trump’s resounding victory in the US where more fossil fuels were a key part of his strategy for America’s future energy and economic security. US insurers could be forced to make more changes to environmental policies to stay clear of new rules or guidelines in place.
“Data from Insuramore on the market size for renewables appear to support earlier findings by Howden that insurance capacity is threatening to bottleneck up to $10 trillion of investment in the climate transition by 2030,” it said. “AXIS Capital, Aviva, and Munich Re are the only major insurers [that] write more direct premiums for renewable energy than fossil fuels.”
The report also comes out just weeks after COP29 in Azerbaijan was largely seen as a washout by campaigners with little progress made on the big issues of the day, though there was praise for insurers that highlighted the risk of inaction on climate change.
The annual scorecard was this year published as a continuum based on the share of fossil fuel premiums and the share of renewable premiums.
Generali had $350 million or under 60% of fossil fuel premiums, putting it as the lowest of those shown. The next lowest were Talanx (HDI) and Allianz.
The largest by premium written was PICC, at $1.65 billion. Second place was Chubb with $975 million.
The largest percentage was Starr Companies with over 80% at $540 million.
For renewable premiums share, Chinese giant Ping An had the highest percentage and a total premium of $550 million. The largest amount of premium overall was Fairfax Financial Holdings with $925 million. The lowest, percentage-wise, was W.R. Berkley Corp at 15%.
Despite the generally negative tone of the report and its findings, it did point out some important improvements. Including some companies that had been at the top of the list of worst offenders in previous years.
“In a landmark move, Italy’s largest insurer Generali announced in October 2024 it would stop insuring oil and gas expansion, including new methane LNG terminals and gas-fired power plants,” said the report. “While its ban on new oil and gas fields applies universally, restrictions on midstream/downstream infrastructure only target “transition laggards” based on their climate performance.”
This, said the report, made Generali the first insurer globally to adopt restrictions covering the entire oil and gas value chain, ahead of European and global peers like Allianz, AXA, Chubb, and Sompo.
“Regulators should also develop standardised risk modelling
platforms and data to which the public has free access.”
It added that in 2025, German giants Allianz and Munich Re face “a critical test” to enforce their January 1 deadline to restrict coverage for and/or investments in oil and gas companies that are not aligned with a credible 1.5°C pathway to net zero emissions by 2050.
“As 96% of oil and gas companies are exploring and developing new reserves and none have adopted a credible 1.5°C-aligned plan,48 both insurers must follow through and drop non-compliant oil and gas clients to maintain credibility,” it said.
There were seven recommendations in the report for what insurers could do to start seeing more transparent and speedy progress. Several of them included their investment actions such as mandated policy on data transparency.
“By requiring insurers to disclose comprehensive and accurate data on both physical and transition risks, sectoral composition of investment portfolios, insurance accessibility, and fossil fuel expansion underwriting,” it said. “Regulators should also develop standardised risk modelling platforms and data to which the public has free access.”
It also called for the necessity of higher capital requirements for fossil fuel exposure to ensure the insurer's own safety and soundness and to account for risks insurers are creating for the financial system.
Reclaim Finance, a French environmental finance pressure group that is part of the coalition of groups that publish the report said this has already started to occur - the European Insurance Supervisory Authority (EIOPA) recently proposed an equity surcharge for fossil fuel assets held by insurers, thereby recognising the risky nature of these assets.
“In the face of the climate crisis, the European Commission must implement this EIOPA recommendation and go further by requiring (re)insurers to stop supporting new oil and gas projects and new liquefied natural gas export terminals, without exception,” it said in its statement on the report. “Reclaim Finance calls on the European Commission to make this criterion essential in the transition plans that will have to be published next year by all financial players, including insurers, under the European The Corporate Sustainability Reporting Directive (CSRD) directive.”
“If AXA and SCOR had set an example on coal, this is far from being the
case on oil and gas, and even less so on liquefied natural gas."
Reclaim highlighted the two French companies in the list – AXA and SCOR – which were overtaken by the Italian insurer Generali.
“If AXA and SCOR had set an example on coal, this is far from being the case on oil and gas, and even less so on liquefied natural gas,” said Ariel le Bourdonnec, Campaign Manager at Reclaim Finance, who was excoriating in his response to the findings. “They are now choosing to take advantage of the climate crisis to increase their prices or even abandon certain policyholders while continuing to fuel the problem by ensuring the expansion of oil and gas. And when they pretend to commit, their promises are tainted by exception.”
Another recommendation was to mandate the use of scientifically robust climate scenario analysis that captures the full complexity of climate-related risks, including tipping points.
Liz Gorgoglione, Director, Credit Risk - Pension Risk Transfer Solutions, Legal & General Retirement America, recently discussed this topic with Insurance Investor and said that insurers would have to be more diligent in this area.
“Part of this situation is insurance companies are going to have to be a lot more diligent about diversifying their risk,” she said. “They have to do that from a geographical risk standpoint anyway, particularly when it comes to certain climate perils, such as wildfires, hurricanes, etc. For us, that's something we have been concentrating on for the last 18 months.”
"While some may counsel delay or half-measures, the physics of
climate change will not wait for political convenience.”
Experts urged the industry to do more and fast. Dr Louise Pryor, Past President of the Institute and Faculty of Actuaries, and Dave Jones, Former California Insurance Commissioner and Director, of Climate Risk Initiative, UC Berkeley School of Law, who co-wrote the foreword said “The choices made in the next few years will determine whether we preserve the possibility of an insurable future. While some may counsel delay or half-measures, the physics of climate change will not wait for political convenience.”
If fears around risk exposure do come true, insurers will be looking closely at investment strategies in the coming years.
