Unfavourable trends in the global reinsurance market, risks related to climate change, and key reinsurance and insurance companies moving away from coal – these are the most important challenges for the power insurance market in 2019 according to experts from Willis Towers Watson.
Apart from the unfavourable trends and the expected increase in costs of reinsurance and insurance, the leading insurance broker’s report makes reference to the Bank of England’s PRA (The Prudential Regulation Authority) 2015 study, which sets a framework for analysing risks that reinsurers and insurers are exposed to due to climate change. The three categories of medium- and long-term risks are:
- Physical risks – directly related to physical damage, increases in claims, and losses, as a result of more frequent extreme weather events
- Transition risks – risks resulting from the transformation towards a low- or zero-emission economy, the decreasing value of coal assets, and the costs of an inefficient transformation pathway
- Liability risks – related to reputational risk and civil liability of energy companies for damages caused by climate change (e.g. climate lawsuits)
The scope of what has been announced so far by the world’s largest insurance and reinsurance institutions regarding their withdrawal from coal (re)insurance and investments is only a step towards keeping the temperature rise below 1.5°C. No (re)insurer has adopted policies compliant with the objectives set by the 2015 Paris Agreement.
This briefing, Challenges for Reinsurance of the Coal Sector, outlines the role of reinsurance in coal expansion and the operation of existing coal infrastructure. It also showcases how the (re)insurance industry moving away from coal impacts the coal sector locally and globally.