Insurance is a funny game. Brokers and underwriters often throw around phrases such as ‘the market is hardening’ or the ‘market is flushed with capacity’; but what does this actually mean for clients.

Earlier this year, in the midst of the placement of a significant coal fired power plant, there were rumblings that insurers would cease from writing such occupancy and that the ‘good old days’ were over. The sector is certainly under the spotlight and some larger international insurers are looking to distance themselves from writing perceived ‘dirty risks’. However, with the placement being heavily over-subscribed, you have to question what impact this stance, taken by several insurers, will actually have.

Back in April, we highlighted the unfriend coal movement and insurers’ response to the Paris Climate Agreement, as well as what this means for insureds in Asia. The catch is that if an organisation only derives 20-50% (dependant on insurer) of their revenue from coal fired assets, those insurers will actually write such risks. More often than not in Asia, power plants are owned and operated by conglomerates, with power generation being only one of their business streams. Accordingly, only a small portion of their combined revenue is derived from this source.

Coal remains the burning topic, but what will be next? With an emphasis on renewable energy in keeping with the Paris Climate Agreement, will petrochemical refineries face a similar fate in the international insurance market? Without question, the wider insurance market remains attractive for buyers, albeit certain areas are under scrutiny. Whilst several international insurers are declining to renew their participation where rates continue to fall, there remains a significant number of insurers who have not followed suit and remain active in this space. 

If you’re interested in discussing this topic further, do get in touch with Julian.