In the absence of the annual market gatherings that typically take place at this time of year, The Insurer’s #ReinsuranceMonth has sought to facilitate debate and discussion around critical industry issues throughout the month of September.

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ESG has figured prominently within those discussions to date, reflecting the increasing awareness of these issues among senior industry executives.

These conversations have reflected both on the underwriting opportunities around climate change as well as some of the difficulties of adjusting business models to meet ESG challenges.

In an interview with The Insurer TV,  for example, Hannover Re CEO Jean-Jacques Henchoz said developing underwriting activities in line with ESG principles was most challenging for treaty business.

“In facultative single risk underwriting, we’re trying to exclude some risks in the future and the coal industry is a good example of this, but we’re also promoting renewable energy which is another illustrative example of good progress being made,” said Henchoz.

“The treaty reinsurance is the big challenge because you don’t have the same level of transparency on the ultimate risks which are included in the coverage,” he added. 

Analysis published in this edition of The ESG Insurer shows Swiss Re is the only one of the big four European reinsurers to have adopted policies to exclude thermal coal risks from treaty coverage. 

Swiss Re has applied its underwriting ban on companies that derive 30 percent or more of their revenues from thermal coal since 2018 across all lines of business, including treaty.

And from 2023, Swiss Re has said it will begin tightening its treaty underwriting policy for thermal coal risks across property, engineering, casualty, credit and surety and marine cargo lines of business.

As our analysis shows, European carriers remain far ahead of their counterparts in the US and Japan in terms of their efforts to scale back fossil fuel underwriting.

The climate opportunity

There are many within the industry that cite climate change as an opportunity, with the industry perfectly placed to create solutions to help society adapt.

Lloyd’s CEO John Neal is among those to have regularly spoken of the climate opportunity. At September’s virtual RVS conference, Neal said the changing climate allowed the industry to “demonstrate its ability to provide the risk management solutions that enable and accelerate the transition to net zero across multiple industries, and many geographies”.

The Lloyd’s CEO described insurance as a “powerful enabler” to provide innovative products and services to finance, manage and accelerate the decarbonisation of industries and economies as well as the growth of greener industry, transport and energy. 

Changing risk landscape

A report by Swiss Re this month has forecast global P&C premiums will more than double to $4.3trn by 2040, with climate risks forecast to spur a 30 percent to 40 percent rise in the global property risk pool.

Against this backdrop, the P&C sector is expected to undergo a fundamental shift in the coming years with business becoming riskier and more complex. 

The recent shift in loss experience caused some carriers to prune their portfolios away from perils such as wildfires, as Mike Mitchell, head of property and specialty underwriting, reinsurance at Swiss Re, explained in an interview with The Insurer TV this month.

But Mitchell also believes global (re)insurers have an opportunity to step up and provide the solutions needed to spur the development of climate-related technology and protect clients against the perils most closely associated with the changing climate.