FERMA Calls on (Re)Insurance Industry To Support Energy Transition
September 20, 2022
The Federation of European Risk Management Associations (FERMA) has called on the (re)insurance industry to do more to support its business clients in making the transition to carbon neutrality.
In a new white paper, Insuring the Transition, issued ahead of FERMA's annual forum October 9–11, the organization called on insurers and reinsurers—and other stakeholders—to address a number of insurance-related issues. The white paper, prepared by members of FERMA's sustainability committee, will be discussed with industry leaders at the forum.
In a statement, FERMA President Dirk Wegener noted the impending effective date of the European Union's Corporate Sustainability Reporting Directive.
"The Corporate Sustainability Reporting Directive will come into effect for financial reporting periods starting on January 1, 2024. This is only 16 months away," Mr. Wegener said. "Companies will be under pressure to show their progress to carbon neutrality, but lack of sufficient risk transfer will slow investments in innovative technologies as more risk must be carried by the enterprise."
"We understand that (re)insurers are grappling with regulatory, business, and legal developments related to climate change, but we urge them to read these comments so they can build a better partnership with their corporate clients to facilitate the transition," FERMA CEO Typhaine Beauperin said in the statement.
The FERMA white paper cites three areas in which businesses are experiencing insurance coverage restrictions for their transition activities.
- Limited or unavailable coverage because of past activities, such as links with coal or mining, making it more difficult for such companies to proceed with the transition.
- Lack of coverage for specific technologies or materials, including offshore solar panels, offshore wind farms, hydrogen fuel or storage, new construction techniques, or other solutions or materials necessary for the transition from fossil fuels.
- Exclusions of specific risks such as exclusion of property damage and bodily injury in some cases when there is a direct or indirect link with coal plants or mining activities or in cases involving the storage or use of battery packs.
"Businesses should not feel punished by insurers for embracing the green transition. As a community of insureds, we are calling on insurers to move from an approach where there is a notable and strict adherence to backward-looking underwriting guidelines. Instead, corporate customers want insurers to gain a holistic understanding of their risks and needs, which would give more flexibility to underwriters and engineers to do business beyond rigid guidelines," the white paper concludes.
"Captives can be a valuable part of the management of transition risks, but they are not a panacea," Ms. Beauperin said. "We chose the theme transitioning together for the FERMA Forum because we want to work with the insurance community, and Insurance in Transition is a keynote session for the FERMA Forum, which is taking place in Copenhagen from 9–11 October."
September 20, 2022