How are reinsurers leaning into the low-carbon transition?

(Re)insurers have an opportunity to enable the transition to a low-carbon economy through both underwriting and investment decisions. The Insurer examines how Europe’s major reinsurers are addressing the challenge.

Europe’s four major reinsurers have all been vocal in the need to transition to a low-carbon economy. Following a turbulent year which has seen the four withdraw from the Net-Zero Insurance Alliance, all have publicly stated they remain committed to net-zero ambitions.

Michèle Lacroix, group head of sustainability at Scor, believes the starting point should be through commitments from reinsurers to reduce emissions from their own activities.

“It starts with being a role model – if we don’t have credible targets, we won’t be credible. You can’t ask others to do something that you don’t apply to yourself,” Lacroix says.

She adds that Scor’s approach has been to identify the most material sustainability-related matters for its activities.

“We cannot do everything – we have to concentrate on what is material for us and where we can be impactful.”

Climate focus

“We have the ability to be a voice in the net-zero world, so it makes sense for us to start with climate. Under Scor’s theory of change, we select our sustainability priorities depending on where we can be most powerful,” Lacroix continues.

“It’s no secret that reinsurers have been hit by the increase in the frequency and magnitude of extreme events. Although we are concerned by the ‘outside-in’ effects of climate change and biodiversity loss on our business model, we also have a role to play to protect people and the planet,” Lacroix explains.

“In an ideal world, we should not have to rebalance the business or the investment portfolios, because decarbonisation should come directly from our clients. Our pathway leading to net zero should be the result of what our clients are doing.”

Reinsurers are also facing increasing scrutiny on the role they play in enabling activities of clients and the wider economy.

“In an ideal world, we should not have to rebalance the business or the investment portfolios, because decarbonisation should come directly from our clients. Our pathway leading to net zero should be the result of what our clients are doing,” Lacroix says.

Underwriting actions

However, it is widely accepted that some along that pathway may need encouragement. To this end, Europe’s big four reinsurers have introduced underwriting restrictions for thermal coal and conventional oil and gas projects to varying degrees.

According to Lacroix, exclusions are a way in which the reinsurance market can send a “very strong signal” as to which activities – whether high-emitting, or with renewable alternatives – may not be insurable in future owing to a lack of capacity.

Capacity instead can be directed to the risks of tomorrow, an area where reinsurers can foster the transition by transforming their own business model to offer new coverages.

Munich Re Syndicate 457 sent shockwaves through the energy insurance market when it announced it was to cease underwriting traditional oil and gas business with effect from the start of this year.

Munich Re Specialty Group then launched Green Solutions, a portfolio of insurance products and services designed to support the execution of customers’ net-zero and sustainability ambitions.

Dominick Hoare, MRSG’s chief underwriting officer, explains: “The Green Solutions portfolio aims to enable new sustainable technologies and support our group ambition to help our clients succeed in a low-carbon economy.

“The road to transition will only be successful if we present opportunities and products that serve our clients and partners, who need to mitigate the risks they are facing.”

Hoare added: “Insurers can serve as an enabler of the energy transition – which is one of the greatest growth opportunities for our sector for a generation – because it is tied to our responsibility to society.

“We have to be proactive and work with our global stakeholders to understand the challenges they are facing in transition risks, which play into mitigating existing risk exposure.”

Swiss Re chief economist Jérôme Jean Haegeli adds that, on the underwriting side, it is key for reinsurers to help ensure that the low-carbon transition is manageable and executable for society.

“It’s all good to rally behind the Paris Agreement, but more important than pledges at the end of the day are actions. It’s not only a question of leading the transition, but also a question of global cooperation,” said Haegeli.

“The value we can provide as an industry to manage the climate transition is giving that risk a price – pricing, disclosing and transferring the risk is all in the same package.”


In addition to the liabilities side of the balance sheet, reinsurers as institutional investors are able to contribute to sustainable financing and climate investment through how and where they select their long-term assets under management.

“There’s probably no other industry which has so much information and knowledge when it comes to the risk perspective,” said Haegeli.

He noted the importance of considering how the global economic and financial market landscape is developing, and whether it will be fit for purpose for the net-zero economy in 2050.

“In order to close the climate investment gap, we need capital markets to reallocate money. It is possible, if you look at the increase in sustainable finance over the last few years – however, today sustainable finance is still niche. The market needs to develop further, and insurance has an important role to play in this regard.”

Haegeli added that the interest rate environment at this year’s Rendez-Vous is starkly different from that of last year – or indeed, of any of the event’s pre-Covid years.

“There is a reset of the interest rate regime. The impact of this on the cost of capital and profitability of insurance companies has important implications for pricing and combined ratios, as well as how much actual capacity is available to fund and underwrite risk,” he explained.

“The era of financial repression has ended, and I do not think we will fall back into the negative interest rate regime any time soon again. Finally, risk again comes at a price, meaning that (re)insurers can improve their profitability and thus strengthen their role as a shock absorber for society.”

He added that the current economic and financial environment, in which interest rates and capital are no longer a “free lunch”, will better enable companies to make decisions with respect to sustainability, as this type of environment encourages longer-term thinking.

“I define sustainability in the broadest sense – not just climate change, but ESG overall, and how long-term thinking is embedded within a company, an industry, or within society,” Haegeli said.

Unique role

Summarising the unique role that reinsurers can play in the transition, Scor’s Lacroix recognised that this is due in part to the nature of the business.

“There is a critical role of (re)insurance because we are the ones who know most about climate risk, and how to price it,” she explained.

“The more we move forward and the climate evolves and changes, the more we have to adapt to a forward-looking analysis of pricing. Again, that’s how pricing can provide signals to the market, and how we can better support the transition of main actors.”

Lacroix concluded: “(Re)insurance is a specific actor. Supporting the transition is not only doing good for others, we’re also protecting our own business of natural catastrophe in the longer term, which may not be the case for other financial institutions.

“The faster the transition, the lower the risk of damages due to climate change. The insurance industry is the only one dealing with the two topics – that’s why we have a specific incentive to succeed in the transition because, it also protects our long-term business.”