The increasingly intense pressure placed on insurers and reinsurers to back away from covering fossil fuels is causing an “unacceptable” problem for German companies, which are being forced to use these energy sources because of shortages caused by Russia’s invasion of Ukraine, according to GVNW president Alexander Mahnke.
The German risk and insurance management community is clearly as supportive of the shift away from fossil fuels to help combat climate change as peers across Europe and worldwide.
But Mahnke pointed out that given the current energy crisis enforced by Russia’s invasion of Ukraine, it is unfair and impractical to force insurers to pull capacity from vital energy sources for reputational reasons.
“It is painfully evident today how dependent we in the Federal Republic of Germany are on Russia as an energy supplier, and how difficult it is to remove this dependency quickly and courageously,” said Mahnke during the annual GVNW Symposium in Munich this week.
“While there were already multiple challenges in the supply chains of German companies due to the pandemic, the Ukraine war has exacerbated these supply chain problems at home and abroad. This affects companies directly or indirectly as part of ‘extended workbench’ dependencies. Rightly so, the federal government and the companies affected are now trying to reduce the dependency of the German economy on Russia, especially in the energy sector, as quickly as possible, and we all hope that this will be done with a view to the coming winter, and [removing] any gas [and oil] supply bottlenecks succeeds,” he continued.
In light of this, the use of fossil fuels by German companies needs to be re-evaluated in the short term at least, argued Mahnke.
“All correctly conducted discussions on the subject of sustainability and ESG and their impact on the insurance industry should now be seen in the light of these current developments. From our point of view, it is unacceptable for companies that are forced to use fossil fuels for the time being to maintain security of supply in Germany, to no longer receive insurance cover from some insurers because they anticipate that they will have to stop writing such risks, without this being absolutely necessary, ie not stipulated by law,” he said.
Mahnke noted that more than 20% of GVNW members said in the association’s annual spring survey that sustainability policies from their industrial insurers had made renewal negotiations difficult.