In March 2022, Mapfre, one of Europe’s largest insurers and the largest non-life insurer in Latin America, published its renewed environmental commitments during its Annual General Meeting. The International Institute for Law and Environment (IIDMA), which analysed in 2021 the Group’s activities as part of a broader study on the insurance sector’s relationship with climate change, has reviewed the company’s new environmental plan, its progresses and weaknesses, and published its findings in the report “MAPFRE Group’s Commitments in Relation to Fossil Fuels”.
Among the main advances, IIDMA highlights that MAPFRE has committed to stop insuring or investing in coal, gas and oil companies that do not have an energy transition plan that allows global warming to be kept to around 1.5ºC.
In terms of the plan’s weaknesses, IIDMA highlights important gaps in information and objectives, related to MAPFRE’s recent adherence to the Net Zero Emissions Insurance Alliance (NZIA). With this, MAPFRE committed to achieving climate neutrality by 2050 in its insurance and reinsurance portfolios. However, to date, MAPFRE has only published the carbon footprint of its investment portfolio, and no interim targets for footprint reduction have been set.
Furthermore, as a member of the NZIA, the MAPFRE Group must contribute to limiting the increase in global temperature to 1.5ºC above pre-industrial levels by 2100. Consequently, if the Group intends to align its insurance and reinsurance portfolios with this climate objective, it must stop insuring and investing in companies that develop projects linked to coal mining or oil and gas fields.
As it did in its 2021 report, IIDMA provides recommendations, including the elimination of the exemptions that allow it to continue to insure new plant or coal mine projects, or the need to publish a roadmap to gradually reduce its exclusion threshold for coal companies in line with its decarbonization commitment.
Billion euro losses and higher policy costs
As the IIDMA report shows, the insurance sector is particularly exposed to physical climate risks. In other words, to the increase in the frequency and intensity of extreme natural events caused by climate change and global warming. In fact, this is acknowledged by the MAPFRE Group in its Consolidated Annual Report 2021, where it indicates that, “to December 2021, MAPFRE was affected by several catastrophic losses like the storms Uri, Volker and Bernd, as well as hurricane Ida, the most relevant being the European storm “Bernd” that in Europe in July, which has had an attributable net impact of 92.8 million euros on the result”.
In addition, a recent study by Swiss Re estimates that climate-related catastrophe losses will cost the insurance industry as much as 158 billion euros in premiums by 2040. As a result, property insurance prices will rise by between 33% and 41%.
IIDMA illustrates with these data the risks to which insurers are exposed. In addition to the direct influence that their activity has on the global climate crisis, a shift of the entire sector towards more sustainable practices is more than advisable. As Quentin Aubineau, IIDMA lawyer and co-author of the report, points out, “the insurance sector plays a key role in the development of projects linked to fossil fuels. It is therefore essential to stop insuring and financing economic activities that are incompatible with the Paris Agreement and the IEA’s roadmap, which aims to make the energy sector carbon neutral by 2050”.