COMMENT: Insurance company FM Global has just announced US$300 million (A$430.83 m) in discount incentives will be allocated to its policyholders globally to encourage resilience.
The global mutual insurance company focuses on property and has an in-house research institute working to understand and mitigate risk to their clients assets. It also has a unique idea: to provide what it calls “resilience credits”, in the form of a 5 per cent discount off clients’ insurance premiums to compensate for policyholders’ proactive investment in climate resilient work.
In Australia alone, climate-related disasters will cost $73 billion a year by 2060 even if action to curb emissions is taken now, a Deloitte report commissioned by the Australian Business Roundtable for Disaster Resilience and Safer Communities has estimated.
FM Global’s new credit has the potential to help those organisations reduce total loss expectancies related to wind, flood and wildfire exposure by more than US$120 billion (A$169.47b).
It’s an important first step, but that US$300 million is also just a drop in the ocean of the insurer’s US$19.4 billion (A$27.39b) surplus from its 2021 investment portfolio – especially when considering that portfolio still includes fossil fuels.
In 2018 the company became the first major US insurer to take action on coal, when it refused to provide support to develop the controversial Adani-owned Carmichael coal mine in Queensland.
But when asked whether the company currently had any clients or investments in the fossil fuel industry, it responded with this statement:
“Yes, it’s a small part of our diversified portfolio aligned with the broader indices like the S&P500.”
The S&P 500 is a stock market index of 500 of the largest companies in the US; 19 of the top 20 companies listed in the S&P 500 for 2022 belong to companies connected with fossil fuels. It includes the likes of: Chevron, APA Corporation, Alliant Energy, ExxonMobil, General Motors, Boeing, Atmos Energy… the list goes on. Occidental Petroleum is the top performer this year, with shares surging 116 per cent. It also includes companies in the tobacco industry and US defence.
FM Global declined to disclose the specifics of its portfolio or its clients.
But as the insurer has a mutual structure (meaning it’s owned by the people who are protected by it), there’s extra motivation to ensure that clients get the best results.
If “best results” are an imperative, there’s an argument to suggest it should consider the that fossil fuel assets are a poor economic bet, and risk stranded assets and value loss.
Let’s hope this new resilience credit will get the ball rolling in the right direction, and isn’t just greenwashing.
The credit is apparently the first of its kind, the company’s vice president of client services Greg Duncan told The Fifth Estate.
“Resilience credits are us responding to our clients’ needs to invest in making their businesses more resilient in a world of a changing climate,” he said.
“Climate change is impacting the resilience of companies all around the world… We want to make clients’ businesses as resilient as possible.”
Another positive step is that the company’s research arm will also introduce a new suite of climate resilience solutions to help clients assess climate risk exposures and prioritise their risk improvement investments.
“If clients are exposed to flooding, wind or rising sea levels, we would work with them to recommend solutions to decrease those exposures. We can see in Australia flooding has been prevalent, and there are things companies can do to better mitigate that risk.
“Our engineers work with the clients to help them understand this. For example, stronger roofs, flood barriers, protection against bushfire. We give them recommendations to protect against these risks.”
Malcolm Roberts, president and chief executive officer added in a statement: “Combined, this new suite of tools, along with the resilience credit, represents a significant investment in helping keep our clients’ businesses going and growing strong.”
Again, we hope it gets the ball rolling.