The (re)insurance industry has a long history of working on society’s hardest problems. Early involvement allows (re)insurers to go beyond simply diversifying risk – they can lead the way to new solutions and innovations by providing incentives to businesses and entire industries to do the right thing for everyone.
The recent trend of increasing frequency and intensity of cat events is a top-of-mind issue, and true to form it is the international risk diversification community at the forefront of addressing it. However, there is one aspect of this phenomenon that is not yet widely addressed by (re)insurance: greenhouse gas (GHG) emissions, especially methane.
Solutions exist today that can deliver site-specific GHG information and data to the oil and gas, financial and insurance industries alike. Basin-level GHG monitoring, wellsite certifications, continuous emissions monitoring and more are available now across many of North America’s 20,000-plus wells. But (re)insurers are largely missing out.
See also: Glimmers of Good News on Climate (Finally)
(Re)insurers need to understand that this is not just an opportunity to demonstrate environmental stewardship and leadership on a societal imperative, but it is also a way to offer more comprehensive coverage to oil and gas operators with more comprehensive risk assessments and loss control. These GHG strategies align with industry best practices for risk mitigation, everything a (re)insurer would want from their insureds.
Chubb is mandating that methane emissions and environmental responsibility become core aspects of their energy insurance. Others are wading into the issue, including Zurich and its exploration of methane emitted by cows. But the industry can do much more.
The forward-looking oil and gas operators implementing GHG reduction strategies are intrinsically the operators (re)insurers should cover with the most favorable terms for two reasons. First, an operator measuring GHG emissions carefully is a better risk. Then, after the policy is in place, emissions monitoring and measuring improves risk management and reduces claims. Within a few years, these types of operators might be the only operators that can get coverage at all because they will be the only ones with dependable data and information for underwriters, and they will be able to demonstrate adequate stewardship to satisfy ESG requirements.
If (re)insurers begin demanding well-specific GHG information and data, not only will they be improving their portfolios, but they will be taking their familiar position at the vanguard of helping solve another of today’s biggest issues.
