Europe's insurers will need a push from regulators if they are to help the European Commission meet its green ambitions, according to one green finance campaigner.
The European Commission is aiming to reduce net emissions of greenhouse gases to zero by 2050 and decouple economic growth from resource use under what it calls the European Green Deal.
Lucie Pinson, founder and executive director of campaign group Reclaim Finance, told the annual conference of the European Insurance and Occupational Pensions Authority, or EIOPA, that every major insurer in the EU continues to insure the expansion of fossil fuel.
Although Europe's biggest insurers had "led the way" in curbing insurance coverage to and investment in the coal industry, some of the industry's policies remain problematic, according to Pinson. For example, she said Lloyd's of London's environmental policy still allows new coal power plants to be insured. Aside from coal, the market still has yet to even address a number of other areas as well, Pinson argued.
Lloyd's in its 2020 environmental, social and governance report said would ask syndicates to stop insuring thermal coal-fired power plants, thermal coal mines, oil sands and new Arctic energy exploration activities from Jan. 1, 2022. It has set a target date of Jan. 1, 2030, for phasing out existing cover in these areas.
Pinson also said that Zurich Insurance Group AG, Lloyd's, Allianz SE, AXA SA and Munich Re are among the world's 15 largest oil and gas insurers.
"None of them have committed to stop insuring oil and gas projects," she said.
Though she acknowledged that insurers had made some commitments on oil and gas, such as curbing coverage for Arctic drilling, these commitments are "a drop compared to what is required."
Insurers that continue to allow cover for new fossil fuel projects "are strictly inconsistent" with targets to limit global warming set out in the Paris Agreement on climate change. Though she acknowledged that number of insurers have taken significant steps to reduce or eliminate their investments in the fossil fuel industry, Pinson expressed concern that insurers would fail to deliver on their European Green Deal objectives if regulators do not prod them to "speed up the transition."
Industry defends record on climate
Insurance industry representatives and executives have defended the sector's environmental efforts, saying it is committed to tackling climate change. Andreas Brandstetter, president of trade body Insurance Europe and CEO of Austrian insurer Uniqa Insurance Group AG, told the EIOPA conference in response to Pinson's comments that there is a "high desire" by the industry to move forward on green initiatives. He also said European insurers are "far ahead" of their peers in other geographies.
Brandstetter also stressed that insurers cannot not simply walk away from some risks. For instance, he said, Uniqa operates in Poland, and the company could not "leave people without energy there."
AXA in an emailed statement said it banned coverage of and investments in coal, but not oil and gas because "most climate scenarios see space for oil and gas." Economies are still dependent on oil, the company said, adding that gas, when used in efficient plants, "is a 'transition' energy."
Other insurers highlighted their support for green goals. Zurich in a statement pointed to its June 2019 decision to sign up to a United Nations business ambition to limit global warming, and Lloyd's said the actions set out in its ESG report align it with the Paris Agreement goals. Allianz said it will phase out insurance client base and the investment of policyholder funds by 2040.
In addition to cutting insurance cover for thermal coal, some companies are taking action on oil and gas. Zurich, for example, said in 2019 it will no longer cover companies that generate more than 30% of their revenues from extraction of oil from oil sands or from mining oil shale, or that generate more than 30% of their electricity from oil shale. Munich Re has stopped providing direct and facultative cover to existing oil sand sites and related infrastructure and plans to reduce its exposure to the exploration and production of oil and natural gas "in such a way that there will be no attributable net CO2 emissions by 2050."