Today, July 4, German insurance association GDV’s insurance regulation conference takes place in Berlin. German and Brussels-based environmental NGOs Urgewald, ShareAction and Insure Our Future use the occasion to collectively call on the lobby organization, speakers and participants in the event to support much more robust climate protection measures.
The organizations focus their criticism in particular on the ongoing discussion in the EP ECON committee regarding Solvency II. After months of delay, a compromise proposal among shadow rapporteurs has been leaked to POLITICO on Friday showing small wins but also large failures from a climate perspective. The NGOs specifically criticize MEP Markus Ferber (CSU), rapporteur for the current Solvency II review and speaker at the GDV conference, for watering down climate ambition and delaying the reviewing process.
The recent departures from the Net Zero Insurance Alliance (NZIA) show that voluntary sector commitments for climate protection can only complement but not replace legally binding rules (See also this briefing by ShareAction). In view of the accelerating climate emergency, EU policymakers have to make sure that insurance legislation is up to date by reflecting the climate-related risks the sector is facing. This is important for both financial and global planetary stability.
Lindsay Keenan, European Coordinator, Insure Our Future:
“Policymakers have to step in now and regulate the insurance sector. Voluntary self-regulation alone has failed to align the sector with the needs of planet and people, as the recent NZIA departures confirmed once again. It is the time to not give in to the insurance lobbies. The Solvency II review process is a fundamental opportunity that must not be missed. EIOPA, the ECB, the European Commission and the Association of Insurance Supervisors have all agreed that climate risk and stranding risk are material financial risks. It would therefore truly be against better judgment if this was not reflected in Solvency II.”
However, the internal compromise proposal by ECON committee’s shadow rapporteurs leaked to POLITICO on Friday shows that EU policymakers are about to fumble the crucial, historic chance for profound climate protection that the Solvency II review holds. The repeated demand by NGOs for increased capital requirements for new fossil fuel projects is not reflected in the current state of the compromise. This omission also ignores the will of 57,000 European citizens who signed an Ekō petition.
In this context, the NGOs call on all members of the ECON committee to not go for shaky compromises in the upcoming discussions and final committee vote and to fully take financial risks of stranded assets in the process of the energy transition into account. Instead, they should put fossil fuel assets in the highest risk category and implement the “one-for-one rule”1.
The NGOs welcome the implementation of mandatory transition plans for all insurers which were originally proposed by several political groups (the Greens, the Left, S&D and Renew) that opposed rapporteur Markus Ferber's (CSU) anti-climate stance. With added pressure from civil society, the plans finally made it into the current compromise amendment proposal. The NGOs now call on all ECON committee members as well as on the Commission and member states to approve and build on this first step towards making insurers and reinsurers more aligned with climate commitments.
A lot will depend on the details to ensure that the proposed transition plans are more than lip service. Now, it is up to the members of the ECON committee to guarantee strict scrutiny of those plans by EU or national supervisory authorities, with clear sanctions if instances of greenwashing or inadequate implementation are found. The plans also play an important role in risk management. They allow supervisors to see if insurers are taking action to actively manage stranding risks by implementing their plans. Only these specifics can put insurers and reinsurers in the EU on track to achieve 2050 net zero targets and meet those sector-wide targets in a consistent manner.
The NGOs call especially on rapporteur Markus Ferber to clear the way for more profound climate ambition than the current compromise seems to hold. Ferber has misused his special power as shadow rapporteur for the Solvency II. At the beginning of the review process, he proposed to erase almost all sustainability aspects, including climate-change scenario analysis, from the Commission’s proposal and thus set the bar low for further discussions. He has also neglected other duties as rapporteur. For example, until now, he has not declared any stakeholder meeting on Solvency II. After months of delay in the reviewing process, the proposed compromises represent a small step forward and do little to recognize the gap between the mounting climate emergency and the EU regulators’ glacial response.
Caroline Metz, Senior EU Policy Officer, ShareAction:
"We call on Markus Ferber to finally act responsibly and work constructively with all the MEPs who made excellent sustainability proposals last summer. Now it is up to Mr. Ferber and all members of the ECON committee to make sure that the proposed transition plans are more than a toothless tiger – meaning these plans have to be strictly monitored by EU or national supervisory authorities. In addition, insurers have to face sanctions if found guilty of any form of greenwashing, including in relation to their transition plan. Finally, work on reviewing and updating insurers' capital requirements must continue urgently. They are currently not fit for purpose and do not account for the high risk that new fossil fuel projects pose – not only to the insurance industry itself, but also to our planet and communities worldwide."
Conference organizer GDV recognizes the need for urgent climate action as well. Recently, the lobby organization warned about climate change effects for the insurance industry and their customers. While NGOs agree with the analysis, they criticize the concluding call by GDV for a stop-loss-regulation, meaning that the German government should step in in case of an “extreme natural disaster”. Such a regulation directly contradicts the insufficient exclusion criteria of the industry regarding the insurance of and investments in fossil projects and companies, as the Insure Our Future Scorecard shows. In addition, a recent publication by Greenpeace Norway and Urgewald revealed the involvement of German insurers Allianz and HDI Global, among others, in providing insurance to the Norwegian fossil fuel industry. Despite the group's green image, Allianz subsidiaries AGI and Pimco repeatedly make prominent appearances in financial research for their considerable investments in coal, oil and gas, most recently in the report published last week by Reclaim Finance and Urgewald.
Anna Lena Samborski, Insurance Campaigner, Urgewald:
“The insurance sector seems determined to unburden itself of any cost or risk linked to the climate emergency. It is actively lobbying for taxpayer money to avoid any reduction in profits as the increasing cost of natural catastrophes bites. Insurers continue to finance and insure the fossil fuel industry even though it is the number 1 driving force behind the climate emergency and these increased catastrophes. Step up and finally take full climate responsibility, most importantly by immediately and comprehensively phasing out insurance of and investment in fossil fuels, both on project- and company-level! It is absurd that civil society constantly has to remind the insurance industry of its fundamental role as society’s risk manager. Since time is not on our side, EU regulators have to act now and use the Solvency II review to align the insurance sector with the pressing need for effective climate protection.”
Protests by Urgewald and Insure Our Future will take place tomorrow, July 4, between 09:00 and 10:30 AM in front of the GDV conference venue in Stralauer Allee 2, 10245 Berlin. Photographs from the protest will be made available after 11:00 AM here.
1 "One-for-one rule": insurers would have to hold one euro/dollar in reserve for every euro/dollar used to insure or invest in new fossil energy projects to cover any future losses, especially from stranded assets. Insurers would thus have to build their own safety net rather than rely on government bailouts. This would make supporting new coal, oil and gas projects very unattractive.