Scor: Harnessing risk management and underwriting discipline for new energy projects
The insurance industry is uniquely positioned to spur positive action in addressing climate change, with carriers “at the forefront” of developing new expertise around climate-related risks as well as evolving technologies, products and solutions, according to Scor’s group head of sustainability Michèle Lacroix.
Lacroix spoke to ESG Insurer following the launch of Scor’s new energy practice, a dedicated unit within the Paris-based (re)insurer’s specialty insurance division.
The practice will support Scor’s new sustainability targets under the recently unveiled Forward 26 strategic plan, which pledges to multiply insurance and facultative reinsurance cover for low-carbon energy by 3.5 by 2030.
In addition, Scor said it will engage with clients representing at least 30 percent of specialty insurance single risk premium over the next three years regarding their ESG commitments and transition strategy.
Guangquan Xu, head of the new energy practice, explained to this publication: “With the establishment of our new energy practice, we consolidate our relevant insurance products and expertise into a unified platform.
“This enables us to furnish clients with a highly comprehensive risk solution tailored to their specific requirements, an imperative given the constantly evolving and complicated nature of the risk landscape in this young industry.”
Xu added that future projects in the practice will cover a range of technologies, including offshore wind farms, hydrogen plants and battery storage facilities.
Insurance needs will also vary, including but not limited to construction all-risk, liability and cybersecurity.
“It is an exciting time ahead,” Xu continued. “By working closely with our clients and partners, Scor’s new energy practice will further strengthen our lead position in this new sector, providing protection to our clients in every step of their energy transition journey.”
Facilitating investment and scale
The move from Scor to form a dedicated practice to help support clients through the low-carbon transition reflects the wider onus on the (re)insurance industry to adopt a prominent role in facilitating the scaling up of innovative renewable technologies.
“The (re)insurance industry has a critical role to play given its expertise on climate risks and their consequences on business models of sectors operating in the real economy,” said Lacroix.
“Managing risks is at the heart of (re)insurers’ business models, as is increasing the resilience of societies.”
Xu added that there are two main ways through which the insurance sector can drive the transition.
Firstly, for risk-averse investors insurance products can provide the necessary security to facilitate investment in new, innovative technologies that would otherwise be regarded as high-risk assets.
“This is especially pertinent in the case of new technologies and large-scale commercial projects, which require billions in capital expenditure and are much needed for reaching net-zero targets,” he explained.
Secondly, Xu noted that a significant portion of insurance placements within the low-carbon sector are through the subscription market. This means that major players can participate in and share a majority of risks globally to collectively learn lessons from claims experiences.
“Through active engagement and collaboration with project teams, conducting thorough risk assessments and employing prudent underwriting practices, the insurance industry can share valuable knowledge and best practices with our clients, assisting them in improving their risk management and overall risk profile,” he said.
Lacroix affirmed the importance of collaboration, adding that in order to offer coverage for new energy and other green projects, (re)insurers require substantial expertise.
“In this sense, (re)insurers are well positioned to help drive action through our client relationships and partnerships that extend beyond the insurance industry,” she noted.
Xu concluded that insureds should be receptive to collaborating with the industry to share knowledge, project updates, and both good and bad practices.
“This collaborative effort could help the insurance company in gaining a thorough understanding and accurate assessment of the associated risks,” he said.
“Both the clients and players in the supply chain should have a comprehensive understanding of the insurance products and their limitations. Transferring every risk solely onto an insurance company can lead to either exorbitant insurance costs or, in some cases, an exceedingly challenging, if not impossible, insurance placement process due to reduced risk appetite and market capacity.”