Insurers must adapt to energy transition or disappear, warns risk manager
The insurance industry runs the risk of disappearing if it does not adapt to climate change and the ESG agenda, a top French risk manager said at the AMRAE conference in Deauville.
Adapting implies offering buyers the insurance coverage they need to transition their businesses to cleaner production processes, something that is not happening today, according to Arnaud Bergauzy, head of risks and insurance in France at Lafarge, the cement group.
“In 30 years, the insurance industry as it is today will be dead,” he said. “Today, insurers are not taking properly into account the urgency of the climate emergency.”
The market must change to survive, Bergauzy warned. His argument has two main elements. First of all, climate exposures are growing fast, and underwriters will have to adapt to this reality in ways that may not be too popular with clients.
For example, CCR, France’s state-owned reinsurer, which manages the country’s nat cat scheme, will have to increase the mandatory rate it charges on property policies by 22% next year in order to remain solvent, he said.
On the other hand, companies are being forced to invest in the energy transition, implementing new production processes and technologies, but insurers are not always keen on helping them by offering adequate covers.
“Many French risk managers are not happy with the services offered by their insurers, and I am the first one to subscribe to that view,” Bergauzy pointed out. “We do not feel supported by our insurers in the energy transition.”
The insurance market has been hesitant in providing covers for new technologies and process innovation, for which there is scarce loss data available for modelling purposes.
But innovation is key to the energy transition, Bergauzy said, offering the example of Lafarge to illustrate his point.
He noted that the company, one of France’s largest polluters, is keen to become a net-zero carbon firm by 2050.
To achieve that goal, it has divested from countries such as Brazil, India and Russia, where dirty energy is still part of the cement production process, and it is modernising the way it produces cement in Europe.
But that requires dozens of millions of euros investments in each plant, an investment that will not boost production.
Companies can therefore barely afford to have comprehensive insurance coverage in place, as losses would add further stress to a transformation process that is already very costly, said Bergauzy.
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The inaugural ESG Insight and Intelligence Conference will take place in London on 26 June. This event will examine the European regulatory demands associated with ESG, look at the impact on the corporate risk profile and consider how these risks can be managed more effectively. It will also drill down on the increasing demands and disclosures requirements placed upon insurance buyers by insurance carriers. For more information, please visit https://events.commercialriskonline.com/ESG-24
