One of the largest reinsurance businesses in the world, Munich Re, has imposed more limitations on its carbon-related business operations.
Beginning on April 1, 2023, the reinsurer will stop making investments in or providing (re)insurance for contracts or projects that are solely focused on:
with no past production as of 31 December 2022, new oil and gas fields, or
as of December 31, 2022, there was no new oil-related midstream infrastructure in operation or under construction.
As of December 31, 2022, there were no new oil-fired power plants in operation or under development.
Direct illiquid investments, primary, facultative, and direct (re)insurance business are all affected by this. The same holds true when such risks are included or combined with other hazards in a single cover (such as existing oil or gas fields), provided that the cover is primarily created to safeguard one or more of these new risks.
Additionally, starting on April 1, 2023, Munich Re will stop making new direct investments in pure-play oil and gas businesses in its own listed equities & corporate portfolio.
From listed integrated O&G firms with the greatest relative and absolute emissions, Munich Re will demand a credible commitment to net-zero greenhouse gas emissions by 2050, including matching short- and mid-term milestones.
Munich Re wants to contribute to achieving the goals of the Paris Climate Agreement as a firm that cares about the environment. Its strategy is built on three key components, including aggressive decarbonization goals, thorough climate risk management, and the supply of cutting-edge risk transfer solutions for climate change adaptation and mitigation. As a result, the Group has established aggressive decarbonization goals for its investments, (re)insurance transactions, and internal business activities.
The way that Munich Re underwrites and invests in fossil fuels
We no longer insure single location standalone risks in the planning, financing, construction, or operation of new thermal coal mines, coal-fired power plants, and the associated infrastructure where construction, preparatory works for the extraction, or operation have not started before 1 September 2018. This restriction applies to both our primary insurance business as well as facultative and direct (re)insurance. If the majority of locations or insured values meet the criteria for new, multi-location covers will be handled similarly to single-location risks.
Munich Re has already stopped directly investing in listed firms' stocks and bonds that get more than 30% of their earnings from thermal coal mining and/or the production of electricity from burning thermal coal for its own assets. Equities and bonds from publicly traded firms that get 15% to 30% of their revenue from these sources are also prohibited, or, in some circumstances, encouraged, in the framework of an engagement discourse.
Munich Re Group expanded its fossil fuel exit strategy to oil sands in the area of oil and gas production in 2019 on both the insurance and asset side: It is no longer permitted to sign facultative reinsurance and primary insurance business (direct and via fronting) of new and existing oil sand sites and new and existing oil sand-related infrastructure. Our recommendation is valid for single-location and stand-alone risks; for mixed policies, we established a cutoff point as long as the total proportion of the insured sum or the direct revenue from the exploration surpasses 20%.
Munich Re refrains from making direct investments in the stocks or bonds of publicly traded businesses that get more than 10% of their income from oil sands mining.
Munich Re will not accept stand-alone coverage for Arctic oil and gas drilling operations, including any associated facilities or infrastructure. As of January 1, 2022, this also applies to mixed covers and reinsurance treaty business that includes exposures to the aforementioned activities exceeding a specified minimum threshold (for renewals of existing reinsurance treaty business as of 1 January 2023). The Arctic Monitoring and Assessment Programme's definition of the Arctic is the foundation for Munich Re's description of the region. Drilling and oil and gas exploration investments are prohibited in the Arctic region.
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