Sustainability in Energy Insurance
12/14/2020
Frank Streidl, Head of Energy, Marine & Construction, and Kayne Sheppard, Underwriter Energy Casualty, at Zurich UK, describe the work the Zurich UK Energy Team is doing - to help deal with the challenges involved in developing sustainable commercial practices within the energy industry and beyond.
A chance to build back better
Significant improvements have been made to help our environment during lockdown – restrictions on global transit, industry and commerce have meant smog and water have started to clear, whereas a number of studies have highlighted the drop in global carbon emissions during COVID-19 lockdowns, when compared to 2019 levels. Studies suggest that emissions will decline between 4.4% - 8% by the end of 2020 – but experts have warned that the trend is unlikely to continue as restrictions are lifted.
However, it’s encouraging to see that world leaders are announcing long-term net-zero greenhouse gas emission goals and are putting the environment at the centre of post-COVID-19 economic activity.
Frank Streidl, Head of Energy, Marine & Construction, Zurich UK, stated recently: “Zurich has always been passionate about climate change and we whole heartedly support action at a time when the environmental challenge is building momentum to reverse or at least stop its detrimental effects.”
Investing in renewable energy
While some substantial adjustments need to be made, developing and enabling access to greener energy sources is one solution. By reducing the use of fossil fuels for energy, clean energy technologies help lower carbon dioxide (CO2) emissions and reduce environmental degradation, while providing social and economic benefits such as new forms of employment and income.
In the MGA space, Zurich is excited to be working with GCube, provider of specialist renewable energy insurance cover. The technologies they protect include, Onshore Wind, Offshore Wind, Solar, Tidal Energy and Wave Power.
Elsewhere, Zurich’s UK Energy team offer a multi-line product that covers the risks of decommissioning projects of offshore oil and gas operators. These projects aim to return the drilling environment to nature in the cleanest way possible. The product, therefore, enables operators to transfer their risks whilst reducing their impact on the environment in a sustainable way.
Kayne Sheppard, Underwriter Energy Casualty, Zurich UK, said: “The practice involves cleanly abandoning the well, along with removing and responsibly disposing of the infrastructure and platform. The process of decommissioning in a responsible and incident-free manner is crucial to the health of our marine environment.
“At Zurich, we want to support energy suppliers in their bid to operate in a more sustainable way, including their decommissioning programmes, which are critical to ensuring minimal lasting environmental impact from drilling and production to wildlife, land and human health.”
Carbon Capture and Storage (CCS)
The use of fossil fuels is commonplace in most industrial processes, for example, when producing electricity. But fossil fuel emissions trap unwanted solar heat and cause the planet’s temperatures to rise. The consequences are clear to see, for instance, sea levels are rising at an alarming rate, we’re experiencing longer wildfire seasons, along with harsher hurricanes and heatwaves. It is estimated that the 2019–2020 Australian bushfires led to the deaths of at least 33 people and over 3 billion animals, also destroying homes and businesses. Early insurance claims in February 2020 were reserved at 1.9 billion Australian Dollars.
Carbon Capture and Storage (CCS) is a technology that can help mitigate the issues caused, by capturing up to 90% of the carbon gasses produced from the burning of fossil fuels. The CCS process prevents the carbon dioxide from entering the atmosphere.
The CCS method consists of three parts: capturing the carbon dioxide, transporting the carbon dioxide, and securely storing the emissions, typically underground in old oil and gas formations.
Zurich is currently spear-heading a task force, designed to conceptualise an insurance product to cover the physical and legal risks associated with CCS. As well as delivering considerable benefits on its own, CCS can also be used to achieve carbon-neutral production of hydrogen fuel, which is considered by many to be the most viable long-term zero-emission alternative to natural gas. Future development of this proposition could help the industry have a more positive impact on the environment.
Carbon footprint tracking
One initiative that is a major step in the right direction towards achieving carbon neutral underwriting portfolios, is an initiative that involves calculating the carbon dioxide emissions released by our clients. This will help us to understand the impact our clients have on the environment and, crucially, it will allow us to work with clients to help reduce their carbon footprint and manage the associated risks.
Zurich proposes to evaluate its customers and work with them to aid them in becoming carbon neutral, all while managing transition risk involved in decarbonising. We hope to provide you with further updates over the coming months, so watch this space.
