Ferma interview: Supporting transition journeys

Ferma has urged the insurance industry to support corporates on their transition journeys. What now needs to happen?

We believe that the insurance industry can play a significant role in making society and corporates more resilient. That role, however, needs to go beyond excluding polluting industries.

We can have the biggest impact by supporting companies on their transition journeys and accompanying them as their business models evolve.

The development of renewable energy has to be supported by the insurance sector which has to provide solutions for energy leaders and help pioneering companies to de-risk innovative projects and attract investment.

Beyond the energy sector, as insurers, we should work collaboratively with clients and their brokers and act as true partners, by providing services that go beyond pure risk transfer, such as training, industry adaption, disaster preparedness and risk consulting.

Is supporting the transition a difficult balance for the industry? 

We know that technology is central to the transition, whether we’re talking about energy, transportation or any other sector.

At present, the industry is being asked to underwrite projects with emerging underlying technologies, for which there is limited data and experience.

That is why risk engineering plays and will continue to play a critical role in enabling underwriters to support clients who are developing or adopting new technologies to meet their net-zero goals.

The transition poses a number of challenges, but it is also an opportunity for those insurers that are open to discussing new technologies.

We were, for instance, a pioneer in gathering risk data about electric vehicles, and one of the first movers in insuring solar panels or wind turbines. AXA was the first to insure windfarms in Germany more than 10 years ago.

Political Risk, Credit & Bonds is another area that is benefitting from the push towards net-zero. That coverage plays a key role in helping innovative projects to secure financing.

ESG-related projects currently account for 25% of submissions in that line of business. This means that the transition is a potential source of growth for that market, in which we have invested significantly in Europe in recent years.

How have the shocks of the past three years influenced how we are thinking about sustainability risk and climate transition?

COVID-19 and climate change have in common that they have profound implications for society, have evolved at a pace that has accelerated suddenly, though on different scales.

The risk industry has realised that neither governments or the insurance sector could tackle such large and complex risks alone. In either case, the associated risks can only be tackled if we strive to increase collective resilience.

In other words, there is no other option but to pull together and work in true partnership.

In commercial risk specifically, that means working with our clients and their brokers to offer more than insurance capacity.

Though it isn’t new, there has been increased realisation that understanding these risks at a more granular level as they evolve by providing tools to model exposures and prioritise risk management efforts, and offering alternative ways to cover these risks, such as captives or parametric insurance, in addition to traditional insurance, is the way to go.

Are near-term concerns - such as the energy crisis - likely to prove a distraction away from longer-term goals? 

Most large corporates have ambitious goals when it comes to the transition to net-zero, and so do insurers.

AXA is a member of the Net-Zero Insurance Alliance and as such has committed to transitioning their insurance and reinsurance underwriting portfolios to net-zero greenhouse gas emissions by 2050. That is no small tasks, and we have to look beyond near-term concerns if we are, as an industry, to deliver on those ambitions.

Corinne Southarewsky is Chief Distribution Officer and Chief Claims Officer, APAC & Europe, AXA XL