Swiss Re, the world’s largest reinsurer, announced new climate targets, including plans for the reinsurer to completely phase-out thermal coal from its treaty business by 2030 (OECD) and 2040 (rest of the world). If implemented properly, this policy shift marks a breakthrough for the reinsurance industry.
"We welcome Swiss Re’s commitment to a full phase out of thermal coal from its treaty reinsurance and call on all other reinsurance companies to do the same. Treaty business is a very large portion of the reinsurance trade and it has been a major loophole in coal underwriting that needs to be addressed. Swiss Re has set a benchmark that the rest of the industry needs to follow, now.”
The Insure Our Future network wrote in early March to ten of the world’s largest reinsurance companies urging them to take action to exclude coal from their treaty business. Swiss Re, which was the world’s biggest reinsurer of premiums in 2019, responded with the release of this new policy and noted that it, “…share(s) your concern that ceding coal exposures into treaties risks could undermine the progress we made on the direct and facultative side.”
"Now that Swiss Re has responded with an ambitious and clear commitment, we call on Munich Re, Hannover Re, SCOR, Berkshire Hathaway, Lloyd’s of London, MAPFRE and R+V Re to quickly follow suit.”
Swiss Re previously committed to apply its existing thermal coal exclusion policy and thresholds to treaty business starting in 2023. Today, it announced that in 2023 it will introduce new thermal coal exposure thresholds for treaty re/insurance across its property, engineering, casualty, credit & surety and marine cargo lines of business and that it will gradually lower these thresholds leading to a complete phase out.
"As Swiss Re finalises the details of its approach to treaties, they need to exclude treaty cover for any companies developing new coal projects immediately. Swiss Re also needs to align its reinsurance business with the need to phase out oil and gas production to limit global warming to 1.5°C, starting with an immediate end to covering new oil and gas expansion projects.”
Reinsurance companies offer cover through two basic types of policies: (1) Facultative reinsurance covers a specific risk or defined package of risks, for example the construction of a specific power project. (2) Treaty insurance covers all risks of a certain type, for example an insurer’s property portfolio in a whole country. So far, companies controlling 56% of the reinsurance market have adopted coal restrictions for their facultative business. Swiss Re is the first reinsurer to announce phasing out coal from its treaty business.