The decision by global reinsurance giant Munich Re to stop investing in or insuring new businesses in the oil and gas sector as of April 2023 is just one example of how concern about climate change is an important issue for the insurance industry worldwide.
This signals a reduction in risk appetite in certain economic sectors. In the case of oil and gas, one additional concern is that if more decisions of this kind are made, it will be harder to cover risks and reinsurance premiums will consequently increase.
FIDES Rio 2023
This will be one of the main subjects debated at the 38th FIDES Western Hemisphere Insurance Conference, which will take place from September 24 to 26, 2023, in Rio de Janeiro. Talks and panel discussions will point out trends and contribute to understanding of how this issue is affecting insurers and business in general.
“Insurance for a more sustainable world” will be the central theme of this international event, which will be attended by representatives of the insurance and reinsurance industry from 18 Latin American countries as well as the United States and Spain.
In October 2022, Munich Re announced that as of April 2023, it will no longer invest in or insure contracts and projects (from the planning to execution phase) for the construction of new oil and gas fields that are not in operation by December 31, 2022, including new oil transport and storage infrastructure.
This restriction also includes oil-fired thermoelectric plants not under construction or operation as of December 31, 2022, and it applies to direct illiquid investments and primary, facultative and direct (re)insurance business.
The same applies where such risks are contained or bundled in one cover together with other risks (e.g., existing oil or gas fields), when the cover is mainly designed to protect one or more of such new risks.
Regarding its own portfolio of shares and publicly traded companies, the reinsurer announced that it will stop making new investments in oil companies. Furthermore, as of January 1, 2025, Munich Re will require a credible commitment to net zero greenhouse gas emissions by 2050 from the companies in which it invests.
Net Zero Alliance
It is expected that other global reinsurers and insurers, especially signatories to the Net Zero Alliance, will impose restrictions aimed at lowering greenhouse gas emissions and reaching neutrality by 2050. AXA, Allianz and Swiss Re are some of the groups aligned with zero emissions.
It is widely agreed that insurance is one of the sectors most affected by climate change, given extraordinary payouts caused by natural catastrophes such as forest fires, floods and severe droughts.