The insurance trap

“Inn-sewer-ants,” repeated Rincewind. “Tha’s a funny word. Wossit mean?”

“Well, suppose you have a ship loaded with, say, gold bars. It might run into storms or, or be taken by pirates. You don’t want that to happen, so you take out an inn-sewer-ants-polly-sea. I work out the odds against the cargo being lost, based on weather reports and piracy records for the last twenty years, then I add a bit, then you pay me some money based on those odds—“

Earlier this year, two insurance majors, Swiss Re and Allianz, announced they would be reducing their coverage of oil and gas projects.

Allianz said that beginning from January 2023 it would “no longer invest in and underwrite new single-site or stand-alone oil and selected gas risks, oil and gas activities related to the Arctic and the Antarctic as well as extra-heavy oil and ultra-deep sea risks.”

The insurance giant also said that “Two years later, as of January 1, 2025, Allianz will require a robust ‘net-zero by 2050’ commitment from the largest hydrocarbon producers as a pre-condition for company-level insurance coverage and investments.”

Swiss Re’s plans are not much different. The insurer said in March that by 2025, “half of our oil and gas premiums from individual re/insurance covers are to come from companies that are aligned with net zero, as per the Science Based Target initiative (SBTi) or a comparable, credible third-party assessment.”

“By 2030, Swiss Re's oil and gas re/insurance portfolios will only contain companies that are aligned with net zero by mid-century. For our treaty business we are developing an oil and gas approach by 2023.”

In case anyone has been charmed by the SBTi, like me, you’d do well to check out their website. It contains highly informative data such as “Targets are considered ‘science-based’ if they are in line with what the latest climate science deems necessary to meet the goals of the Paris Agreement – limiting global warming to well-below 2°C above pre-industrial levels and pursuing efforts to limit warming to 1.5°C.”

But it is not the purpose of this article to pick on climate reduction initiatives. I mean, emission reduction initiatives. The purpose of this article is to peek into the insurance trap the world’s biggest providers are opening up for most if not all of us.