Insurance Jottings

Class of 2020 start-ups dominate energy liability market entrants

ERS, Convex, Inigo, Sirius, White Bear, Conduit, Vantage and Ki are among those expected to enter the energy liability market in 2021, according to broker Miller, with some already writing new business.

IMB 2020 Piracy and Armed Robbery Report shows increase in incidents of crew kidnappings in the Gulf of Guinea

Standard Club article 3^rd February 2021

The ICC International Maritime Bureau (IMB) recently published its 2020 report on Piracy and Armed Robbery against Ships.

The reports states that in the last year, 195 incidents of piracy and armed robbery were reported to the IMB Piracy Reporting Centre (PRC). This figure is higher than the previous year when there were 162 incidents.

Of the 195 incidents reported in 2020, three vessels were hijacked and there were 20 attempted attacks. Meanwhile there were 11 incidents where the vessel was fired upon and 161 vessels boarded.

The rise in the overall number of incidents is attributed to an increase of piracy and kidnap reported within the Gulf of Guinea as well as increased armed robbery activity in the Singapore Straits.

Gulf of Guinea

The region accounted for most of the global kidnapping cases with 130 crew kidnapped out of a total figure of 135 (equivalent to 95% of all kidnapping cases). These occurred as a result of 22 separate incidents of kidnapping.

The report notes that incidents in the Gulf of Guinea are particularly dangerous as the majority of perpetrators were armed with guns and there is growing concern as to the ability of pirates to operate further from shore.

The IMB say that this demonstrates the pirates’ increased capabilities in the Gulf of Guinea and advises vessels to exercise caution when transiting this region and they should follow the recommendations in BMP West Africa and keep a vigilant lookout at all times.

Singapore Straits

There were 23 attacks reported in this region, an increase of nearly 50% compared with 2019. In the majority of these attacks, the pirates/armed robbers were able to board the vessels while the vessels were underway.

The report suggests that a strict watch should be maintained. Generally the attackers will abort an attempted attack once spotted and the alarm is sounded and the authorities are notified.

Indonesia

The number of incidents reported in Indonesia remained at a consistent level with 26 reported incidents in 2020 against 25 in 2019.

The report notes that the majority of the attacks took place whilst vessels were anchored in anchorages while two incidents took place while the vessels were berthed. Vessels are advised to maintain a strict anti-piracy watch when transiting these waters.

Somalia

There have been no reported incidents since 2019. While the IMB PRC continues to monitor the situation in the region, shipowners and vessels transiting through this area are reminded to remain vigilant and cautious as Somali pirates still have the capability and capacity to carry out attacks.

For more information, please contact your usual club contact.

As Insurers Exit Coal Underwriting, They May Find It’s Good for Stock Valuations

Article from The Insurance Journal 2^nd February 2021

As far as climate groups like the Sunrise Project are concerned, getting insurers out of the coal underwriting business is the most important thing they can do. No more insurance, no more coal.

It’s something Sunrise has been pushing for years. But while it’s happening in Europe, it hasn’t caught on in America.

Analysts at Société Générale SA published a report about European insurers and reinsurers which, for the first time, includes a specific ESG input for stock valuations. It primarily reflects each insurer’s stance on coal, the dirtiest of atmosphere-wrecking fossil fuels. The analysts determined that an insurer’s position on coal underwriting and investments can have an effect on its valuation ranging from -3% to +9%.

In other words, insurers that do more to exit coal can gain points in their stock valuation while those who have done the least will lose.

SocGen’s scoring metric is most heavily weighted toward environmental issues, as opposed to social and governance factors. Using this system, the bank’s analysts raised their target price for AXA SA shares by 6%, their target price for Swiss Re AG, Zurich Insurance Group AG, Assicurazioni Generali SpA, Allianz SE and Munich Re by 5%, and their target price for Scor SE by 4%.

Prudential Plc ranked lowest of the ten companies in the SocGen report, getting just a 1% boost in its target price from its coal policies.

Putting a stop to coal underwriting is particularly significant because, without insurance, coal projects are simply not viable, the SocGen analysts wrote in their 74-page report. “Therefore, the insurance industry can, almost single-handedly, exert pressure on coal energy producers, which other industries are less well placed to do,” they wrote.

Climate Analytics, a climate science institute, said coal is the most carbon-intensive fossil fuel, and getting rid of it is a key step to achieve the emissions reductions needed to limit global warming to 1.5°C. The institute said its research shows that coal needs to be phased out globally by 2040 to meet commitments in the Paris Agreement.

Nevertheless, little has been done to curb the growth of coal, the SocGen analysts wrote. As recently as July, new coal projects with a combined capacity of 737 gigawatts were still in the pipeline or under construction. Given this potentially disastrous trend, insurance companies deciding to get out of the business could have an outsized influence on curbing coal.

The SocGen report cites analysis from Insure Our Future, which said AXA and Swiss Re scored the highest for their underwriting policies. Both companies said they have stopped insuring new and existing coal projects. SCOR, Munich Re, Allianz and Zurich Insurance have “somewhat less comprehensive” efforts to side-line coal, since they still provide insurance for some existing coal operations, according to the report

European insurers are at the forefront of dumping their coal investments, too. SCOR, AXA, Swiss Re, Zurich Insurance and Allianz are leading the way, the analysts said.

The same can’t be said for US insurers, such as American International Group Inc and Travelers Cos, said Ross Hammond, senior strategist at the Sunrise Project. These companies are providing a lifeline to the coal industry by continuing underwriting support, he said.

AIG and Travelers are among the companies who have yet to take any steps to restrict support for the fossil-fuel industry, according to a report published in December by Insure Our Future.

The Sunrise Project is among the non-profits behind “BlackRock’s Big Problem” campaign, which is pushing the world’s largest money manager to use its heft to press companies to align practices with a low-carbon world. For the past four years, Sunrise Project has worked through Insure Our Future to pressure the global insurance industry to stop underwriting and investing in coal.

“Ending insurance for coal and other fossil fuels is most important thing for insurers to do to fight climate change,” said Peter Bosshard, the Sunrise Project’s finance program director. “It’s in the public interest.”

Aviva Investors Weighs Ditching Holdings in Biggest Carbon Emitters for Climate Inaction

Aviva Investors said on the 1^st February that it could ditch its stock and bond holdings in 30 of the world’s biggest corporate emitters of carbon if their boards failed to take sufficient action over climate change.

The move comes as asset managers including BlackRock and Legal & General Investment Management look to ratchet up the pressure on companies to form a plan to transition to a lower-carbon economy, ahead of the next round of global climate talks.

The British asset manager, part of insurer Aviva and which manages £355 billion in assets,

said its Climate Engagement Escalation Programme would target companies in sectors including oil and gas, mining and utilities.

The programme would last between one and three years, depending on the specifics of the company concerned. Aviva declined to name the companies concerned, but is a big shareholder in leading oil majors including Royal Dutch Shell and BP.

Among the actions Aviva said it expects of the companies are that they commit to net zero carbon emissions by 2050 and ensure their plan to do so is in line with the Science-Based Targets Initiative, an NGO-led group which signs off on corporate climate plans.

The companies would need to integrate the climate goals into their business strategy, including capital expenditure plans; set short- and medium-term targets; align management pay with the goals; and ensure lobbying efforts supported the goals.

“For our engagement approach to have impact, it must be accompanied by a robust escalation process, including the ultimate sanction of divestment,” Mirza Baig, Global Head of ESG Research and Stewardship, said in a statement.

Progress would be monitored on a six-month basis, with escalation measures open to Aviva including voting against directors at the companies’ annual general meetings, filing shareholder resolutions and working with stakeholder groups to apply pressure, it said.

“This approach has the complete backing of our investment teams,” said David Cumming, Chief Investment Officer for Equities at Aviva Investors.

“By fully integrating our approach across stewardship and the investment teams, we will be able to maximise our ability to influence the companies we have targeted towards positive climate strategies.”

McLarens targets growth with Vanderwal & Joosten acquisition

Loss adjuster McLarens has acquired Vanderwal & Joosten (VWJ), a construction and engineering, environmental, liability and agricultural loss adjusting and technical claims firm in the Netherlands.

Dutch Court Orders Shell Nigeria to Pay Damages from Oil Pipeline Leaks

A Dutch court has ordered Royal Dutch Shell Plc’s Nigerian unit to compensate for oil spills in two villages over 13 years ago.

Shell Nigeria is liable for damages from pipeline leaks in the villages of Oruma and Goi, the Hague Court of Appeals said in a ruling on the 29^th January.

The amount of compensation will be decided later. The court also ordered the Nigerian unit and its Hague-headquartered parent company to build better warning systems so future leaks can be quickly detected.

The case is the first in which a company and its foreign subsidiary have been tried in the Netherlands for allegedly breaching duty of care abroad, and it could have far-reaching implications for future suits brought against oil firms. The ruling sets a precedent for where

such case can be heard and potentially increases the number of court cases taking place in oil companies’ home countries, rather than those where alleged pollution is happening.

“We continue to believe that the spills in Oruma and Goi were the result of sabotage. We are therefore disappointed that this court has made a different finding on the cause of these spills and in its finding that” Shell’s Nigeria unit is liable, Shell said in a statement.

“Sabotage, crude oil theft and illegal refining are a major challenge in the Niger Delta.”

The court also said that a case over whether Shell was liable for an oil leak in the village of Ikot Ada Udo would continue. The court established that the spill was a result of sabotage, but is seeking to determine whether the pollution has spread and if it still needs to be cleaned.

Shell has other legal woes to contend with. In a separate action brought by Milieudefensie, the Dutch arm of Friends of the Earth, a court in The Hague will determine in May whether Shell is violating human rights by extracting fossil fuels. While in the UK, thousands of Nigerians are asking British legal authorities for permission to sue the company for environmental damages caused in the Niger Delta.

After the ruling on the 29^th January, the only possible future legal avenue left to either party, would be to appeal at the Netherlands’ highest court.

UK Chancellor Sunak Seeks Deeper UK Insurance, Banking Ties With Switzerland

UK Chancellor of the Exchequer Rishi Sunak held talks with his Swiss counterpart on the 27^th January as the two countries seek to deepen financial services ties in the wake of Brexit.

The virtual discussions with Federal Councillor Ueli Maurer focussed on the goal of “a comprehensive mutual recognition agreement” to cut costs and barriers for UK firms operating in Switzerland and vice versa, the Treasury said. The negotiations aim to cover sectors including insurance, banking, asset management and capital markets.

“Our ambition is to deliver one of the most comprehensive agreements of its kind in financial services as part of our plan to seize new opportunities in the global economy now we have left the EU,” Mr Sunak said in a statement. The two nations have a “shared commitment to high standards of regulation, market integrity and investor protection,” he said.

Mr Sunak is trying to seize opportunities available since Britain completed its departure from the European Union at the end of last year. He has hinted at a repeat of Margaret Thatcher’s “Big Bang” period of financial services deregulation, and in November laid out a wider vision for the industry including a review of listing rules and a pledge to issue the country’s first green gilts in 2021.

Mr Sunak told the House of Commons on the 26^th January that he hopes to provide an update when he announces the budget on the 3^rd March. “We are doing the technical work required to make sure that the launch of our green gilts are successful,” he said.

In November he said he hoped the move would spur a wider market for corporate green bonds. His plans for financial services also include plans for mandatory disclosure by companies of their exposure to climate-change risks by 2025, measures to attract innovative businesses to Britain and a consultation on reforming the UK’s rules governing funds.

The Treasury said talks with Switzerland are set to continue “at official level over coming months.” But the UK is already strengthening its ties, and earlier this month, the Treasury said it plans to allow trading in Swiss shares, reversing an EU ban.

Talks With Banks

Regulations aimed at granting share trading equivalence to Switzerland’s trading venues are due to enter force on the 3^rd February, subject to parliamentary approval. The Treasury said it expects the Swiss will reciprocate.

Even so, that’s unlikely to be enough to repair the damage wrought by Brexit. Before the EU ban, London-based trading of Swiss shares averaged €1.3 billion (US$1.6 billion) per day, equivalent to about a fifth of the trading in EU shares which has now been lost.

Also on the 27^th January, Mr Sunak held talks with the heads of some of the biggest global banks, according to the Treasury, which didn’t detail the attendees. The chancellor intends to reiterate the government’s commitment to the UK financial services industry and express “confidence that Britain will remain one of the world’s pre-eminent financial centres” it said.

Another meeting was organised for the week commencing the 1^st February between the chancellor and representatives from the insurance industry, asset managers and other firms.