In a time of oversupplied reinsurance market capacity, what do movements such as #unfriendcoal and The Paris Agreement mean for the Asia-Pacific reinsurance market, if anything?
Background
A growing number of insurance companies, increasingly affected by the perceived consequences of climate change, are selling holdings in coal affiliated entities and refusing to underwrite their future operations. This is according to a new report conducted by The Profundo group*, which rates the world’s leading insurers’ efforts to distance themselves from the fossil fuel industry that is most responsible for carbon emissions.
The objective of their research was to map the involvement of the top-12 European insurance groups and top-6 European reinsurance groups in the fossil fuels sector, concluded by analysing the investments, underwriting activities and policies of each.
Pressure leads to action
French insurance major AXA has led the way in announcing it is ending insurance support to coal-intensive business. Companies getting more than half of their turnover from coal mining or thermal coal energy are now only eligible for AXA insurance cover in “exceptional” circumstances.
This policy extends to the businesses’ holding companies, but not to other non-coal affiliates. It does not include other carbon-intensive industries or to other types of coal-related businesses for which exposure data is insufficiently reliable.
Impact on reinsurance market capacity
Drilling down into the Asia-Pacific region, Miller has looked at whether this will have any short or long term impact on reinsurance market capacity for power plants fuelled by coal and mining risks. In the top five global coal fired power plants, Asia is represented as follows:
| Country | Shelved/cancelled | Operating/under construction |
| China | 731,942mw | 1,030,885mw |
| India | 547,082mw | 258,538mw |
| Vietnam | 33,550mw | 25,606mw |
| Indonesia | 25,475mw | 40,599mw |
Source: CoalSwarm, global coal plant tracker
Our opinion
Whilst this is a clear shift in the global reinsurance market, we suggest that early engagement with insureds needs to be adopted to adequately address the potential exposure on reinsurance placements.
Recently, Miller placed both the operational property and terrorism programmes for a 660mw coal-fired thermal power plant in the Philippines, wherein a total of 11,787mw of operating/under construction plants exist. You can read more about this here.
For now, with the continuing oversupply of reinsurance market capacity available, we would suggest that movements such as #unfriendcoal and The Paris Agreement should not have a significant impact on reinsurance placements; however this should none-the-less be closely monitored over the course of the coming months.
Miller's Facultative reinsurance expertise
About #unfriendcoal
The Unfriend Coal network is a global coalition of NGO’s and social movements that is pressuring insurance companies to get out of the coal business and support the transition to clean energy.
About The Paris Agreement
The Paris Agreement (French: Accord de Paris), Paris climate accord or Paris climate agreement is an agreement within the United Nations Framework Convention on Climate Change (UNFCCC) dealing with greenhouse gas emissions mitigation, adaptation, and finance starting in the year 2020.
Source: The Profundo group*
For further information, please contact Julian Coates.