Climate change: made possible by QBE
QBE provides the insurance the fossil fuel projects need to get off the ground and continue operating. The company underwrites dirty projects like oil rigs and coal mines all over the world, and even insures some of Adani’s business in India.
But at the same time, QBE is paying out hundreds of millions of dollars every year on extreme weather events, the impacts of which are being made worse as a result climate change.
Why would QBE support the fossil fuel industry that poses massive financial risks to the company, not to mention the risks faced by humanity?
According to Tom Herbstein of Cambridge University’s insurance project ClimateWise, “climate change fundamentally challenges the existing insurance business model.”
Concerned shareholders have filed a resolution, calling on QBE to disclose the risks it faces as a result of climate change. Insurance companies were singled out for specific and detailed climate risk disclosure recommendations by the Financial Stability Board’s Task Force on Climate-related Financial Disclosures. The shareholder resolution asks QBE to meet those recommendations.
The resolution, coordinated by Market Forces and co-filed by Local Government Super will be considered and voted upon by shareholders at QBE’s annual general meeting on 3 May 2018.
UPDATE: On 3rd May 2018 the shareholder resolution calling on QBE to disclose the risks to its business from climate change was backed by 18.6% of shareholders – one of the biggest votes for climate action at an Australian AGM ever. The resolution dominated the meeting as QBE acknowledged it had suffered the financial impact of another horror year for weather catastrophes.
In other good news, QBE also appears to have virtually ruled out any backing for Adani’s climate-destroying Galilee Basin coal mine, at least for now.
Read more about the AGM here.
QBE supporting Adani
At their 2017 annual general meeting in Sydney, QBE revealed that even though it has not yet been approached to underwrite the Carmichael mega mine, it has an ongoing relationship with its owner, Adani. The insurer, which operates globally and is a major underwriter of fossil fuel infrastructure, supports Adani’s businesses in India, and some of their cargo ships.
Adani is going to need insurance at every point of its plans to build the Carmichael mine and export its coal to power stations in India and worldwide. QBE’s existing relationship means it is highly likely that Adani would approach the company in future.
Proudly supporting fossil fuels
Fossil fuels might be something the company tries to shy away from today, but only a few years ago, they were clearly proud of their role as a major insurer of coal mines – demonstrated beautifully by their 2012 annual report cover (pictured right).
A significant part of QBE’s business model involves underwriting large energy projects including offshore oil rigs, gas pipelines and coal mines. The great irony here is that QBE claims to incorporate environmental risks in its approach to underwriting. But among the many fossil fuel projects it has underwritten, you’ll find projects like the BP Deepwater Horizon, Pemex, which also exploded in the Gulf of Mexico, and Ultracargo in Brazil.
On a good day, these projects are digging up more and more carbon that is putting the climate at risk. On a bad day, they’re a massive hazard for the environment and human life.
Does QBE not understand the role of the fossil fuel industry in driving climate change? Or the fact that oil spills and coal dust kill ecosystems and people? Maybe QBE simply doesn’t believe climate change is an environmental risk.
And then there’s the company’s own investments in the fossil fuel industry. While these aren’t publicly disclosed, it is likely that QBE has significant exposure to fossil fuel assets through its investment portfolio.
Paying the price
It’s widely known that climate change is causing increasingly more frequent and severe natural disasters. QBE is failing to keep up with the changing environment and it’s costing them dearly. From 2010 to 2017, QBE’s cost of large risk claims and catastrophes has averaged 11.4% of Net Earned Premium; compared to an average of just 8.1% in the seven years to 2010. This massive shift shows just how much the changing climate is impacting QBE’s business.
QBE is in a unique position – if they continue to enable the expansion of the fossil fuel industry through underwriting, they will continue to face the increasing cost of extreme weather events. Green-washing will not address climate change nor the inherent risk in their portfolios. Only serious and rapid change to their business model will.
- January 2018 – World’s oldest insurance market Lloyd’s of London announces coal divestment due to climate concerns, joining other big UK and European insurance companies, including Aviva, Allianz, Axa, Legal & General, SCOR, Swiss Re and Zurich in ditching coal stocks.
- December 2017 – AXA, one of the world’s largest insurance companies, announced it would divest another Euro 3.1 billion from coal, tar sands and pipeline companies to combat climate change, and would also stop insuring any new coal, tar sands and associated pipeline projects.
- November 2017 – ‘Unfriend Coal’ campaign launches Insurance Scorecard, showing 4 international insurers have restricted coal underwriting (Swiss Re, Zurich, AXA and SCOR).
- February 2017 – APRA Executive Board Member spoke out about the “potentially system-wide” financial risks posed by climate change. According to the regulator, these risks “include the potential exposure of banks and insurers’ balance sheets to real estate impacted by climate change and to re-pricing (or even ‘stranding’) of carbon- intensive assets in other parts of their loan books”. Regulatory guidance has also been provided overseas, with the Bank of England and California state government leading in the area.
- September 2016 – a group of Market Forces volunteers handed out 1000 clap banners to Sydney fans as they headed into the MCG ahead of the team’s preliminary final. Reading “Swans goal” on one side and “QBE quit coal” on the other, the banners were a great way for fans to support their team and call for strong climate action from its major sponsor at the same time.
- May 2016 – Activists gave QBE’s headquarters a colourful new rebranding, illustrating how the insurance company was making climate change possible through its underwriting of major fossil fuel projects. At its AGM later that day, the company faced strong shareholder pressure over its role in the fossil fuel industry.