Insurers must adapt to energy transition or will disappear
Source: Middle East Insurance Review | Mar 2024
The insurance industry runs the risk of disappearing if it does not adapt to climate change and the ESG agenda according to risk managers.
Lafarge Cement France head of risks and insurance Arnaud Bergauzy told an AMRAE conference that adapting implies offering buyers the insurance coverage they need to transition their businesses to cleaner production processes, something that is not happening today.
He said, “In 30 years, the insurance industry as it is today will be dead. Today, insurers are not taking properly into account the urgency of the climate emergency. The market must change to survive.”
Mr Bergauzy said his argument has two main elements. First, climate exposures are growing fast and underwriters will have to adapt to this reality in ways that may not be too popular with clients.
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. We do not feel supported by our insurers in the energy transition,” he said.
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 vital to the energy transition and 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. M