From 23-26 October, underwriters and brokers from the global reinsurance industry will meet at the annual Baden-Baden reinsurance meeting in Germany to negotiate new reinsurance contracts. Given the foundational and decisive role of the reinsurance industry in enabling fossil fuel extraction, the Baden-Baden meeting deserves critical attention.
Looking at the dynamics of the 2022 Baden-Baden Reinsurance meeting, we see:
- Many fossil fuel companies pushing for new and expanded coal, oil and gas projects all of which need reinsurance but with the clarity that no new fossil fuel projects are or can be aligned with a 1.5C target;
- Very few, if any, fossil fuel companies having any credible transition plans;
- The clear and urgent need to stop further fueling the climate crisis;
- The need to urgently decarbonise energy systems;
- The fossil fuel industry reliant upon the reinsurance industry to operate;
- But with the reinsurance industry not reliant on the fossil fuel companies;
- Reinsurers being cost billions in unanticipated climate catastrophes payouts;
- The social conscience of the reinsurance industry staff and management.
While the planet burns and floods, causing crops to fail and increasing food insecurity, the cost of fossil fuel produced energy is also soaring, resulting in a cost of living crisis. The global reinsurance industry executives and brokers, fresh from their sojourn to the Rendezvous de Septembre insurance conference in Monte Carlo, will be sitting in the beautiful German spa town of Baden-Baden making deals that will influence how many degrees warmer the planet will be in the next decade.
The global reinsurance industry, which rakes in $220 billion USD in annual (non-life) premiums, plays an essential role in creating the climate crisis. Fossil fuels companies can not operate without insurance and insurance companies can not operate without reinsurance. The world’s relatively few large reinsurers play a critical role in enabling fossil fuel companies to operate by providing a vital backstop to insurance cover. Reinsurers enable and allow insurers and fossil fuel companies to take risk they otherwise could not afford to take and they also invest billions in fossil fuel companies.
Despite paying out billions more than they had anticipated for the increasingly severe and frequent catastrophes caused by climate change and despite the wider human, biodiversity and economic damage caused by these climate catastrophes, many reinsurers continue to reinsure and invest in fossil fuel companies.
Reinsurance companies have known for decades that their actions help to cause climate change but continue to provide the reinsurance cover that enables the extraction and burning of oil and gas at levels that will drive global warming way above 1.5C and continues to invest in fossil fuels companies.
As society’s risk managers, reinsurance companies should help protect us from and recover from catastrophic risks. In recent years, many have started listening to climate science and stopped insuring and investing in coal companies, but they also currently choose to disregard climate science with regard to oil and gas.
Earlier this year two leading reinsurers Swiss Re and Hannover Re adopted oil and gas exit policies that are more aligned with the science. They were joined on 6 October by Munich Re, the world’s largest reinsurer. However SCOR, Lloyd’s of London and many others have so far taken only incremental steps that do not match the necessity and urgency of our times, or worse have taken no significant action at all.
It’s time for reinsurers to:
- Immediately cease insuring new and expanded coal, oil, and gas projects.
- Phase out, in line with a credible 1.5ºC pathway, insurance for coal, oil and gas companies.
- Divest all assets, including assets managed for third parties, from coal, oil, and gas companies that are not aligned with a 1.5ºC pathway.
Read Insure Our Future’s full set of demands to the insurance industry here.