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FORTUNE.COM // NOVEMBER 2019
the company finds existentially worrisome about climate change,
says Eric Smith, head of Swiss Re’s business in North America, is
that, as the world warms, the company’s “ability to predict fre-
quency” in assessing the future flow of mayhem “is becoming a
little shaky.” Smith describes discussions he has had with his fellow
executives: “What we say in private is, ‘My gosh, we’ve had two bad
years, and now we’re going to have a third bad year?’ ” The crush of
intense hurricanes is “ just not right. It’s just not normal that this is
happening year after year.”
WISS RE’S RESOLVE to confront climate change
intensified after the 2015 Paris climate conference, the
international gathering at which most countries made
voluntary pledges to stanch their emissions enough to
prevent average global temperatures from jumping
more than two degrees Celsius above preindustrial levels. That’s
the threshold beyond which, most scientists say, climate change
would have particularly dangerous effects.
Like many big companies, Swiss Re signed a similar voluntary
pledge. That in turn triggered a decision inside the company to
analyze the way its investments and its insurance decisions were
facilitating the financing of carbon-intensive infrastructure. It
wasn’t long, Corti recalls, before support for coal emerged as “the
hotspot—the elephant in the room.”
Swiss Re’s initial move was a relative no-brainer: dialing back
the money it invested in companies that mine and burn power-
related coal. Swiss Re, like insurance companies generally, is a
large investor; it parks premium revenue in various assets to earn
money to finance future payouts. In 2016, Swiss Re began pulling
its investments in mining companies that derive more than 30%
of their revenue from coal and from power companies for which
coal represented more than 30% of their generation capacity.
The investments snagged by that screen have amounted to only
$1.3 billion, or about 1% of Swiss Re’s $132 billion investment
portfolio. But Swiss Re saw it as a first step in shifting its assets to
lower-carbon sectors—a matter not just of environmental benefit
but, more important, of financial prudence, with renewable energy
getting cheaper and making coal less competitive.
Swiss Re’s next move was more controversial within the firm
because it involved the core of its business—deciding whom it
would and wouldn’t cover in the first place. After internal debate,
Swiss Re began in July 2018 to decline to insure pools of risk with
“exposure” to coal that exceeded 30%. Underneath that catchall
word was some important fine print: Swiss Re
would apply the restriction not to the whole
company that was applying for coverage but
only to the specific property that that company
wanted Swiss Re to insure or reinsure.
That narrower exclusion would cause “less
collateral damage,” explains Lasse Wallquist,
senior sustainability-risk manager at Swiss
Re. The company could sell insurance even
to coal-heavy firms—as long as what those
firms wanted Swiss Re to insure wasn’t itself
coal-heavy. “We would insure the biggest coal
company ever,” Wallquist notes, if that company
wanted Swiss Re to cover “a solar plant.” The
percentage of premium income that it sacrificed
to this decision was, Wallquist says, “low.”
However small the sums involved may be,
Swiss Re’s moves have struck both fans and foes
as a big deal. To climate campaigners keen to
asphyxiate the already-ailing coal industry by
pushing financiers to cut off its supply of money,
the decision by the world’s biggest reinsurer
to begin pulling the plug is a pivotal win. Says
Kuba Gogolewski, an anti-coal activist in Poland,
which still generates about 80% of its electric-
ity from coal: “When you look at where climate
change can be tackled, it’s actually reinsurance—
and reinsurance in the most-developed countries
—where we have the most leverage.”
Swiss Re doesn’t disclose companies or
insurers from which it pulled back coverage as
a result of its coal policy, and it declined to com-
“WHAT WE SAY IN PRIVATE IS, ‘MY
GOSH, WE’VE HAD TWO BAD YEARS,
AND NOW WE’RE GOING TO HAVE A
THIRD BAD YEAR?’ [IT’S] JUST NOT
RIGHT. IT’S JUST NOT NORMAL THAT
THIS IS HAPPENING YEAR AFTER YEAR.”
RACING A RISING TIDE
