Munich Re acts on oil and gas underwriting, investment

Munich Re has announced new measures to reduce its involvement with the oil and gas sector, an area that is increasingly being targeted by climate activists in their campaigns to pressure financial services providers into quitting fossil fuel businesses.

The world’s largest reinsurer says starting April 1 next year it will no longer invest in or insure contracts and projects exclusively covering the planning, financing, construction or operation of new oil and gas fields where no prior production has taken place as at December 31.

Munich Re says the decarbonisation measures will also apply to new midstream infrastructure related to oil and new oil-fired power plants if they have not yet been under construction or operation by the end of the year.

“This applies to direct illiquid investments, our primary, facultative and direct (re)insurance business,” Munich Re says in a statement this month.

The reinsurer says the same applies where such risks are contained or bundled in one cover together with other risks such as existing oil or gas fields, when the cover is mainly designed to protect one or more of such new risks.

“As an environmentally conscientious business, Munich Re aims to play its part in meeting the targets of the Paris Climate Agreement,” the reinsurer says.

“The group has therefore set itself ambitious decarbonisation targets for its investments, its (re)insurance transactions and its own business operations.”

Munich Re has also made changes to its own listed equities & corporates portfolio, with the business to cease conducting new direct investments in pure-play oil and gas companies as of April 1.

And in January 2025, the reinsurer will require listed integrated oil and gas companies with the highest relative and absolute emissions to have a “credible” commitment to net-zero greenhouse gas emissions by 2050 including corresponding short- and mid-term milestones.

A group of climate campaigners who formed Insure Our Future say most large insurers have now backed away from insuring new coal projects but the momentum is “only starting” in the insurance industry’s shift away from oil and gas.

The market share of insurers with oil and gas restrictions has grown from 5% to 14.9% among primary insurers and from 3.1% to 37.6% among reinsurers this past year, Insure Our Future’s annual scorecard released week say.

But the quality of many of the oil and gas restrictions is much “poorer” than that of the coal exit policies.

“Several policies only restrict the exploration but not the development of oil and gas reserves,” the 2022 scorecard says.

Click here for the 2022 scorecard.