The (re)insurance industry has a long history of working on society’s hardest problems because today’s top-of-mind issues are yesterday’s risk management questions. This early involvement allows (re)insurers to go beyond simply doing their part and diversifying risk – they can lead the way to new solutions and innovations by incentivizing businesses and entire industries to do the right thing for everyone.
The recent trend of increasing frequency and intensity of CAT events is one of those top-of-mind issues, 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.
Chubb has taken the lead, that methane emissions and environmental responsibility would become core aspects of their Energy insurance. Others are wading into the issue, including Zurich and its exploration of methane emitted by cows.
Solutions exist today that can deliver site-specific GHG information and data to the oil & 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+ wells. But (re)insurers are largely missing out.
This is not just an opportunity for (re)insurers to demonstrate environmental stewardship and leadership on a societal imperative, but it is also a way to offer more comprehensive coverage to oil & 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.
The forward-looking operators implementing GHG reduction strategies are intrinsically the operators (re)insurers should cover with the most favorable terms. There are no technical or regulatory barriers to connecting (re)insurers with these innovative operators. Within a few years, these types of operators might be the only operators who 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.