World’s Second-Largest Insurer Says New Fossil-Fuel Projects Are a Bad Bet
Are new fossil-fuel projects a good bet? The world’s second-largest reinsurer is saying no.
Swiss Re announced an enhanced oil and gas policy that rules out insuring most new oil and gas projects, making it the first major insurer in the industry to do so.
“Swiss Re is one of the world’s ultimate risk managers and the policy which it published today sends a strong message to fossil fuel companies, investors and governments: oil and gas operations need to be phased out in accordance with climate science or they may become uninsurable by the end of the decade,” global coordinator of Insure Our Future Peter Bosshard said in a statement responding to the news.
The new policy is outlined on page 34 of Swiss Re’s 2021 Sustainability Report. The insurer said that it would no longer underwrite or financially back oil and gas projects that receive final approval after 2022, unless these projects are part of a company plan for achieving net-zero emissions by 2050, as verified by a third-party assessment like the Science Based Targets initiative (SBTi).
It also set new deadlines for aligning its portfolio with the goal of reaching net-zero emissions by 2050. By 2025, it said that half of its oil-and-gas premiums would come from companies with science-based 2050 net-zero targets and by 2030, all of them would. Further, it said that by 2022 it would no longer back companies that based more than 10 percent of their production in the Arctic, with the exception of Norwegian companies. It also said that it would develop similar plans for oil and gas in treaty reinsurance by 2023.
Swiss Re said its policies were based on a report from the International Energy Agency (IEA). The IEA stated that there could be no more fossil fuel projects if the world wanted to meet the Paris agreement stretch goal of limiting global warming to 1.5 degrees Celsius above pre-industrial levels by 2050, as Reuters reported. Scientists have said that limiting global warming to 1.5 degrees is essential for avoiding the worst impacts of the climate crisis.
However, green groups like Insure Our Future and Reclaim Finance responded positively to Swiss Re’s announcement, with some constructive criticism.
“By taking steps to stop insuring new oil and gas projects and companies that won’t aim at aligning their activities with climate science by 2030, Swiss Re is headed in the right direction,” Reclaim finance director Lucie Pinson said in a statement. “The policy is not perfect yet and we encourage its peers to build on it to fully align with a realistic 1.5°C scenario. As the IEA Net Zero Roadmap shows, this should mean drawing a red line against fossil fuel expansion and excluding both projects and companies that cross that line well before 2025.”
Insure the Future also said that the new policy relied on a truly effective assessment of oil-and-gas net zero plans by SBTi or another third-party group. Further, it noted that the Arctic policy did not exclude all oil-and-gas projects in the vulnerable region.
Swiss Re is part of a growing movement of insurers not to back fossil-fuel projects. It is part of the UN-organized Net Zero Insurance Alliance, which currently consists of more than 20 insurers who have pledged to have net-zero portfolios by 2050, the insurer said.
Bosshard noted on Twitter that Hannover Re and MAPFRE had also announced similar policies last week.
“Together these three companies cover 21% of the global reinsurance market. Hello Momentum!” he said.
However, there are many more major insurers yet to get on board.
“Now, the Insure Our Future campaign calls on Munich Re, Lloyd’s and SCOR, which together account for 26% of the global reinsurance market, to make commitments which build on Swiss Re’s approach by the time of their annual general meetings,” Bosshard said in a statement.