Swiss Re will begin tightening its treaty (re)insurance underwriting policy for thermal coal risks from 2023 and exit all exposures in OECD countries by 2030 and the rest of the world by 2040.
New thermal coal underwriting thresholds will be applied across Swiss Re’s property, engineering, casually, credit and surety, and marine cargo lines of business from 2023. They will be gradually reduced until the risks are completely phased out.
Last year, Swiss Re said it would stop underwriting the world’s 10% most carbon-intensive oil and gas companies by 2023.
Updating its investment policy to achieve net-zero emissions by 2050, Swiss Re has now said it will reduce the carbon intensity of its corporate bond and equity portfolio by 35% by 2025. It has already reduced the portfolio by 30 percent between 2015 and 2018. It plans to exit all coal-based assets in the portfolio by 2030.
At the same time, the reinsurer has set a target to increase investments in renewable and social infrastructure by $750m and expand green, social and sustainability bond exposure to $4bn by the end of 2024, from $2.6bn at the end of last year.
Christian Mumenthaler, Swiss Re group CEO, said: “Climate change remains the biggest challenge we face as a society. The stakes are high and require immediate attention. Signing up to net-zero emissions by 2050 and setting concrete climate targets are important first steps. What needs to follow now is action. We are moving ahead in all areas of our business to accelerate the transition towards net zero.”
As an additional measure, Swiss Re said it will work with companies in its equity portfolio to reduce their carbon emissions and develop their own corporate climate strategies.
Swiss Re’s group chief investment officer Guido Fürer said: “We believe that by engaging with the real economy and supporting the companies we invest in to develop a climate strategy and to manage related risks, we will improve our risk-adjusted returns, while also propelling the transition to a net-zero emissions economy.”
Swiss Re said its targets for underwriting and investment have been set against a protocol adopted by the Net-Zero Asset Owner Alliance, which it joined as a founding member. It will report on the target progress each year.
The group has already committed to net-zero emissions from its own operations by 2030. It has introduced a carbon levy on direct and indirect emissions from its operations starting at $100 per tonne of CO2 from 2021, and doubling to $200 per tonne by 2030.
Environmental campaign group Insure Our Future said Swiss Re’s new underwriting targets are a “breakthrough” in reinsurance, as they extends existing initiatives to reduce coal underwriting in direct and facultative reinsurance to treaty business. The campaign called on other reinsurers 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,” said Lindsay Keenan, European coordinator for Insure Our Future.
“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 Vienna Insurance Group to quickly follow suit,” he added.