Insurers invest billions of euros around the world. With the insurance coverage, you make sure that new factories, power plants or infrastructure projects are even possible. However, shareholders and customers are increasingly demanding that their investments contain climate change and no longer cover companies that pollute the environment. On the other hand, in terms of carbon footprint, they exceed the brand, criticize industrial customers.
Large insurers should also contribute to climate change
When it comes to financing the fight against climate change, insurers are quickly needed. Because they are managing huge sums of money that they need to invest in the most profitable way possible. Capital investments in the German insurance sector alone amounted to nearly 1.762 billion euros in 2020, according to the GDV trade association. For comparison: Federal government spending reached 443 billion euros last year, despite corona pollution, according to the finance ministry, only about a quarter of that amount.
The large insurers of Allianz in Munich Re, but also medium-sized providers such as Sparkassen-Versicherung or Hanse Merkur, have become members of the Net-Zero Asset Owner Alliance. Under the auspices of the United Nations, institutional investors have pledged to reduce climate-damaging emissions from their investments to zero by 2050. However, it’s not that easy – currently there are simply less. . green investments that investors are looking for.
The Net-Zero Insurance Alliance is younger and even smaller. Its members also want to reduce emissions from their core business, that is to say the granting of risk cover, to zero by 2050. And at this stage, at the latest, conflicts with customers can occur: to achieve this goal, insurers, especially in the commercial and industrial sectors, must be much more restrictive when issuing new policies.
Anyone who earns their income from mining coal or developing new natural gas fields can already see this very clearly. More and more insurers, especially in Western Europe, are completely withdrawing from the fossil fuel sector. But industrial customers are concerned that other sectors are also affected: car manufacturers, for example, because their products are quite difficult from a climate neutrality point of view. This is reported by Stefan Rosenowski, Managing Director of GVNW, the lobbying association for industrial insurance clients. Not all of them, but some insurers are reducing capacity or toughening conditions.
âWe see this as a false point of pressure on the economy of insurance taking,â Rosenowski said. Even with such pressure, climate-neutral energy production and industrial production cannot be achieved in the short term, he argues. In addition, companies would have to bear the risks themselves that they would otherwise transfer to insurers.
In the case of large companies, captives are an alternative. They are their own small insurance companies. When it is created, the risk remains with the group, but the captive, unlike the company as such, can for example conclude contracts with reinsurers and thus reduce the group’s own risk. Such a construction is usually too complex for small businesses.
For GVNW, a refusal of coverage by traditional insurers is counterproductive from a climate protection point of view. Because if companies have to assume their own risks, it always involves a lot of equity. âThis capital is then subtracted from the necessary investment in climate change,â says the CEO.
âAs long as business is allowed, it must also be insurable. “
Thomas Haukje, president of the Federal Association of German Insurance Brokers, goes even further. Insurers apparently wanted to be faster than politics, hence its claim. âAt the moment, we have the impression that some insurers consider too far the guardrail put in place by politics and society. Alexander Mahnke, Insurance Director at Siemens and CEO of GVNW, sums up the demands of industry and brokers: âAs long as the business is licensed, it must also be insurable.
Petra Riga-MÃ¼ller dismisses the accusation of reducing or denying coverage to many industries under the guise of climate protection. She heads the industrial insurance division of the Zurich Germany group. âWhen it comes to exclusions, we don’t use the watering can principle, but support customers on their transformation journey with credible, science-based climate plans,â she says.
Zurich maintains close contact with the sustainability managers of the respective companies and thus also obtains information on climate plans which is not publicly available. âOn this basis, we decide on the continuation of the business relationship.
The reinsurer Swiss Re also speaks of support for âtransformation towards low-carbon production sectorsâ and underlines that it is significantly increasing its commitment to securing renewable energies.
Because even in this sustainable sector, companies complain of a lack of insurance coverage because the new technology is first of all a brake for some providers in the assessment of risks. Ultimately, the coverage restrictions for areas considered problematic also affect clean energy: âI need 4.7 tonnes of copper for a large wind turbine,â explains Patrick Fiedler, Senior Vice President Corporate Insurance at BASF. However, some insurers no longer offer policies for copper mines.
Industry representative Rosenowski does not want to address his allegations to the entire insurance industry. There are certainly providers who offer coverage to the usual extent, if a long-term technology change strategy is in place, and who even actively support this process. “Unfortunately, this is not how all of the major potential insurers operate.”