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June 9, 2022 Thomas Spiller
Welcome to our ESG roundup, keeping you up to date on the insurance industry’s most significant ESG-related news. The highlights this month: World Environment Day.
Read our summary and analysis below.
This past Sunday (June 5) was not only the Queens Diamond Jubilee celebration but also World Environment Day, a day that has grown in importance since its inception 49 years ago. The day is celebrated to encourage awareness and action for the protection of the environment, a mission that in recent years has been taken up by corporates due to pressures from government, regulators, customers and the wider community.
However, shareholders do not always agree, one such example was the recent Travelers AGM where 85% of shareholders voted against a proposal requesting the insurer “adopt and disclose new policies to help ensure that its underwriting practices do not support new fossil fuel supplies”. This example highlights the importance of balancing ESG strategies with shareholder priorities.
In the first analysis of its kind, we spoke to over 20 Bermuda-based (re)insurers and ILS funds about their approach and strategy on ESG, and have aggregated the findings into a structured set of themes. In the report we provide a unique assessment of the Bermudian (re)insurance market, what carriers see as the drivers and barriers to further ESG development and how far they embed ESG across all parts of our framework.
Download the report here.
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Lloyd’s expects syndicates to have “credible view” of net-zero journey in ESG plans (The Insurer – subscription required)
All Lloyd’s syndicates will be expected to have a credible plan towards achieving net-zero by 2050 as part of the 2023 business and capital planning process. However, Lloyd’s will not be prescriptive on managing agents’ ESG strategies as expectations will depend on the size and sophistication of each PLC.
BoE assessment brings comfort around climate assessment but need for engagement on capital remains critical… (The Insurer – subscription required) The Bank of England (BoE) Climate Biennial Exploratory Scenario has concluded that Regulated UK carriers have made good progress in incorporating climate risk into their existing risk governance framework. Around half of participants have integrated climate scenarios into their own Risk and Solvency Assessment reports. However, the BoE also highlighted the need to prioritise investment in climate risk assessment.
Bank of England warns insurers to act on climate change or face 15% profit hit (The Insurer – subscription required)
The BoE’s Climate Biennial Exploratory Scenario projected a rise in average annualised losses of up to 50 percent on UK exposures if insurers take no action on tackling climate change, with those that do not manage effectively facing a 10-15 percent hit. These figures come from the Bank of England (BoE)’s deputy governor Sam Woods who was speaking following the BoE published the findings of its exercise stress testing how Britain’s financial system will cope with climate change.
MPs to scrutinise sector’s net-zero commitments (The Insurer – subscription required)
The House of Commons Environmental Audit Committee (EAC) has announced that it will be launching an inquiry into how the financial sector can aid the UK’s net-zero transition.
Regulators take aim at ESG ratings in fight against greenwashing (Financial Times – subscription required)
Global regulators are increasingly taking aim at sustainable investment ratings, according to the FT, with the aim to “stamp out” greenwashing in the ESG investment sector through more strict parameters. Over recent years ESG investing has grown significantly to just under £3tn under management in 2021.
SEC prepares to crack down on misleading ESG investment claims (Financial Times – subscription required)
Specifically in the US, the FT reports that the SEC is ready to crack down on inflated ESG credentials by requiring investment funds to disclose how ESG funds are marketed, how ESG is incorporated into investing and how these funds vote at companies’ annual meetings, according to the FT and people familiar with the SEC’s thinking.
Allianz to sell majority stake in Russian operations to Interholding (Allianz press release)
Allianz has agreed to sell a majority stake in its Russia operations to the owner of Russian insurer Zetta Insurance. Allianz will retain a minority stake of 49.9% in the business, outlining that the transaction is aimed at ensuring continuity for clients and employees. The transaction is expected to have a negative impact of €400m on the P&L.
Zurich Insurance to exit Russian market, sell business to local team (Business times)
Zurich has sold its Russian business to 11 members of the units team, under which it will operate independently under a different brand. Zurich held around 0.3% of the non-life Russian market.
Europe seeks G-7 coordination on Russian oil insurance ban (Bloomberg UK)
The EU is coordinating a ban with the G7 on insurers providing cover for the shipment of Russian oil. Without the cover, Russia would have to find alternatives for risks including oil spills.
WTW launches TCFD reporting in climate diagnostic tool (ESG Today)
Willis Tower Watson has enhanced its flagship Climate Diagnostic tool by building capability that will enable its clients to generate reports in line with Task Force on Climate-Related Financial Disclosures (TCFD) requirements. WTW said the move is aimed at addressing “the growing call for a consistent framework and set of standards for climate-related reporting alongside comparable metrics.”
NN Group expects to accelerate its coal investment exit deadline (Insurance Business UK)
Dutch insurer NN Group outlined that it expects to accelerate its coal investment exit deadline that is currently set at 2030. This comes in response to fears that Europe may move back to the fossil fuel to supplement the lack of gas and oil that would normally be supplied by Russia.
Sompo rules out Arctic energy and tar sands but criticised for “insufficient” coal strategy (The Insurer – subscription required)
Sompo has ruled out providing insurance for new oil sands and Artic energy exploration, becoming the first of Japan’s big three carriers to do so. In addition the carrier will no longer underwrite or invest in coal-fired power plants and mines but “would consider coal projects where greenhouse gas emissions are aligned with net zero by 2050 targets, particularly those that include technologies such as carbon capture, utilisation and storage or ammonia co-firing”.
Allianz unveils sustainability plans (Insurance Business)
Allianz this week released its 21st sustainability report, reaffirming its commitment to being a leader within insurance. New commitments include;
Marsh revealed in oil pipeline project shunned by leading banks and insurers (Financial Times – subscription required)
The FT and Bureau of Investigative Journalism has revealed Marsh as the broker arranging insurance for the controversial east African oil pipeline that has been shunned by major banks more than a dozen global insurers. Involvement comes despite a protest from 100+ staff of the broker.
AIG accused of “fuelling climate disaster” by activist group Citizen (The Insurer – subscription required)
After the release of its second annual ESG report, AIG have been accused by activist group Citizen of continuing “to gloss over its role in fuelling climate destruction. Through underwriting and investments, AIG enables the dangerous buildout of oil and gas infrastructure, driving escalating wildfires, flooding, and heatwaves around the world.”
Travelers shareholders reject request for fossil fuel underwriting ban (The Insurer – subscription required)
At the recent AGM, Green Century Capital Management requested that the firm “adopt and disclose new policies to help ensure that its underwriting practices do not support new fossil fuel supplies, in alignment with the IEA’s Net Zero Emissions by 2050 Scenario”. Around 85 percent of shareholders voted against the proposal. A separate proposal requiring Travelers to report on how it will measure and reduce GHG emissions was adopted.
About the author
Thomas Spiller, Senior Manager
Tom is a Senior Manager at Oxbow Partners and has a range of experience across strategy, growth, digital and operating model projects in Europe, the UK and the London Market. Prior to Oxbow Partners, Tom spent three years working in the Strategy team at Suncorp, Australia’s largest general insurer. Tom has dual bachelor’s degrees in Economics and History from the University of Queensland.
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