In an exclusive interview with The Insurer TV, Richardson said that while some of these industries may have “something sustainable to offer” in the future, they currently do not make it through Parhelion’s screening process.
“We don’t have a legacy of writing fossil fuels and we don’t want to develop a legacy so simply, they’re not part of our business going forward. That doesn’t mean we won’t work with fossil fuel companies, but we will only work with them on their sustainable activities,” he said.
“We’re also not going to do aviation and we’re not going to do marine because we don’t think those industries have taken a responsible stance in delivering their own commitments to emission reductions,” Richardson added.
Parhelion – billed as the world’s first fully sustainable insurer – is currently in the process of raising up to $500mn in equity ahead of the launch of its ESG-focused underwriting platform on 1 January.
It is understood that business will initially be written out of Europe (with the UK serving as a branch) and Bermuda, with Parhelion hoping to receive regulatory approval for a Class 4 reinsurer on the island.
Expanding on these plans, Richardson said: “In the first instance, we’re going to be a direct primary insurer and that’s going to be the majority of our business.
“In terms of treaties, we’re simply not going to do marine and energy because that’s where the bulk of the unsustainable business sits,” he said.
With no viable sustainable reinsurance solution available in the market – according to Richardson – he sees this as an important component to the insurer’s proposition.
“We want to use that to work with local cedants around the world to enable them to deliver sustainable insurance locally in their markets,” he explained.
“We would love to buy sustainable reinsurance but it doesn’t exist yet. So by creating it, we will also solve another part of the jigsaw.”
Not a market of one
Parhelion is not the only entity working towards providing sustainable underwriting solutions that align with ESG strategies and global sustainable targets.
In October, Lloyd’s largest insurer Beazley received the green light from Lloyd’s for its 2022 ESG syndicate in a box.
Richardson said it’s “inevitable” others will follow.
“We never expected to have a monopoly or a market of one, but actually we think it’s going to be really difficult for others to follow,” he said.
“The incumbents have so much legacy business that they simply can’t and won’t walk away from and therefore won’t be able to replicate the pure play sustainable platform that we will be offering to our clients.
“And we think all the incumbents have been saying ‘oh, we will be net zero by 2035 or 2050’, which is effectively confirming that we’re going to have an open field to play in for all that time, which is somewhat a luxury for any start-up,” Richardson added.
In terms of me-too copycat start-ups, Richardson said Parhelion would welcome them, “but we also know that there are significant barriers to entry”.
However, Richardson also warns of greenwashing and the negative impact of this.
“There is a lot of very nice stuff being done out in the insurance market and we would like to see more of that. But it shouldn’t be used as a fig leaf to cover up some of the less sustainable things that the insurers are doing,” he said.
For Richardson, he thinks it is realistic for the industry to walk away from certain business, but he acknowledges this is not something that can happen overnight or without thinking of the wider business consequences.
“This has to be done in a responsible way and companies will have competing tensions, shareholders responsibilities, fiduciary responsibilities, that sort of thing.
“But I think it will be more of a self-selecting thing [by clients] than people think. Clients are becoming more and more interested to know who their suppliers are and that will include their insurers. So if they don’t walk away from this business or they’re not part of enabling that [sustainable] transition, I think they could be selected against by the clients.”
Richardson’s comments are part of a wider interview for The Insurer TV, during which we delve further into Parhelion’s business strategy, ESG commitments more generally, regulation in this area and Richardson’s COP26 ideal outcomes.