A new report by the French bank Societe Generale makes the case that insurers who reduce coverage for the oil and gas sector could become eligible for an additional ‘green’ valuation premium.

The report follows a Societe Generale report from December 2020 which found that exiting coal and other ESG factors can add billions to insurers’ valuations, with a green premium of up to 6 per cent.

The report also notes that reducing exposure to oil and gas (O&G) should be the next environmental objective for insurers and that some insurers, such as AXA and Generali, have started by restricting insurance coverage on new O&G ventures, such as oil sands, oil shale and Arctic drilling. It proposes that continuation of this move away from O&G should lead to a more tangible ESG valuation premium for insurers, noting that O&G is a more dominant sector and steps to curtail emissions from the O&G sector could help unlock an additional ‘green premium’ for the sector.

Peter Bosshard, global coordinator for Insure Our Future, said, “Zurich, Allianz and AXA, who have made numerous strong climate commitments, remain some of the world’s biggest oil and gas insurers. They have no excuse for enabling the continued expansion of fossil fuels. Ending cover for new oil and gas projects would not only protect the climate and their reputation; the Societe Generale report makes clear that it would also increase their shareholder value.”

Reinforcing its previous report on increased valuations based on coal exclusion policies, Societe Generale’s new report highlights the plans made to exclude coal in treaty contracts by several European reinsurers. They note this as “the most important new step taken so far this year” as it should “make it more difficult for small players to offer cover for coal-based businesses, since they would find it increasingly difficult to cede some of those risks.”

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