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Reducing exposure to oil and gas: The next environmental objective for insurers

Aug 28, 2021

Shedding fossil fuel portfolios by the Indian public sector life and non-life insurer/reinsurer: For the sake of rating, reputation, stock price and ESG expectations:

Some findings from SocGen:

‘While insurers (23 in all) have moved to end their underwriting of coal-related activities, they have been slow to act on oil and gas. That’s mainly because the insurance market for those fossil fuels is considerably larger, with estimated premiums of more than $17 billion in 2018, compared with $6 billion for coal power, said Peter Bosshard, program director at the Sunrise Project and global coordinator of Insure Our Future (IOF)’.

‘European insurers have shown their desire to combat global warming by exiting coal insurance and coal-related investments. Today, most of the major European insurers and reinsurers won’t touch new coal projects and have established clear roadmaps to fully exit coal. Consequently, coal companies are finding it more difficult and expensive to find coverage, with many reportedly facing rate increases of as much as 40%, according to the SocGen analysts’.

‘Reducing exposure to oil and gas has to be the next environmental objective for the insurance industry, said Nick Holmes, the London-based head of the insurance research team at Societe Generale‘.

Is this a writing on the wall for?

1. Life Insurance Corporation of India (LIC) given its imminent listing, by not investing in fossil fuels anymore, can it attract quality capital and achieve/maintain a strong listing price?

2. General Insurance Corporation of India (GIC) and The New India Assurance Company Ltd. (the two listed public sector entities headed for privatisation) – despite all the challenges, can this eventually boost investor credibility?

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