Chinese insurers lag global peers on fossil fuel policies

Chinese insurers continue to provide insurance for fossil fuel projects and lack investment exclusion policies in the sector, compared with its Asian and European peers, a scorecard published by the Insure Our Future campaign has revealed.

Sinosure and the People’s Insurance Company of China (PICC) do not have restrictions on fossil fuel investments put in place, nor do they have restrictions on underwriting fossil fuels, the report published on Wednesday (November 2) found.

Ping An does have restrictions on coal, but “lax conditions allow it to continue insuring most projects, indicated by its near last ranking of 21st on underwriting with a score of 0.3/10,” the global coalition wrote in a statement.

Sinosure, PICC and Ping An could not be contacted for comment.

“President Xi has announced that China will no longer build any overseas coal plants, and so we don't expect that Chinese insurance companies will underwrite any further coal projects overseas. While this is positive, the UN's 2020 Production Gap report has found that we also need to reduce the use of existing coal by 11% per year for a chance to limit global warming to 1.5 degrees Celsius,” Peter Bosshard, director at non-profit The Sunrise Project, which is part of the coalition, told AsianInvestor.

“Insurance companies around the world, including in China, should reduce their underwriting of existing coal operations accordingly and expand their support for renewable energy projects instead,” he added.

The production of oil, coal and gas must be reduced by 6% over the next 10 years to limit global warming to 1.5 degrees Celsius, the report wrote. But the current rate of production is estimated to grow 2% annually.

“Insurers, as society’s risk managers, have a responsibility to actively support global action to avoid climate breakdown, and the power to drive the transition to a low-carbon economy. Without insurance most new fossil fuel projects cannot go ahead and existing ones must close,” the report wrote.

Within Asia, the scorecard also looked at Japanese insurers and found that Tokio Marine had ended cover for coal power plants and mines while MS&AD ended cover for plants only, putting them ahead of most US insurers, albeit behind European ones.

“Samsung Fire & Marine was the first Asian insurer to announce limited restrictions on insuring and investing in coal with a policy that still outclasses most U.S. insurers. It ranks 17th for underwriting (scoring 0.9/10), but it has been overtaken by regional rival Tokio Marine which ranks 16th for underwriting (scoring 1.2/10),” the report wrote.

European insurers trended towards the top of the list, which Bosshard said was not a surprise.

“In Europe, customers, employees and the public at large are expecting insurance companies to be part of the solution on climate change and so it is no surprise that European insurers have led the insurance industry's shift away from coal,” he said.

“Many US insurers are still trying to maximise short-term profits at the cost of the society within they operate, while many Asian insurers hesitate to take climate action before their governments have done the same,” he said.

Generally, however, the insurers still have some ways to go. None of the insurers scored above 5 out of 10 for fossil fuel insurance and other climate leadership. Under fossil fuel divestment, only AXA scored above 5 – on Friday (October 29), the French insurer extended its oil and gas exclusions to include new greenfield explorations and other “unconventional” projects.

Generali and Suncorp are the only two insurers who have stopped providing insurance for new oil and gas projects, according to the report, which urges insurers to also engage with customers on clean energy transition.

“Such engagement must be time-bound however. If insurers (and shareholders) don't see a sufficient response from fossil fuel companies after two years of engagement, they should stop supporting a business that fuels the climate crisis,” Bosshard said.

“A rapid transition away from coal and other fossil fuels will undoubtedly impact the workers and communities that have so far depended on these industries. They will need to be supported through retraining and other efforts in a just transition program. The longer we wait with phasing out coal and other fossil fuels, the more rapid and painful the transition will have to be, so it is best to move forward with this transition without delay,” he said.