General Insurance Article - Mine to test insurers commitment to climate promises

Nigel Brook, Partner, Clyde & Co comments on the the government’s decision yesterday not to block a new coal mine in Cumbria - the Woodhouse mine – is likely to prove controversial for a number of reasons.

 Not only does it look inconsistent with the UK’s public commitment to reduce carbon emissions, it sets a poor precedent ahead of the UN climate summit in November, where the UK is to urge other nations to phase out fossil fuels.

 Significantly, the mine provides an early test of commitment by the insurance sector to take account of climate risk.

 The PRA is already pressing UK insurers to take action by requiring authorised re/insurers to meet the expectations set out in its Supervisory Statement SS3/19 by the end of 2021. The very largest of them will also be required to take part in the BoE's Biennial Exploratory Scenario (BES), involving detailed climate stress tests. UK re/insurers will also need to meet TCFD-aligned disclosures, which will become mandatory for most by 2023.

 In parallel, Eiopa has launched a consultation about a proposal that EU insurers actively support the energy transition and Lloyd’s of course has recently set its first ESG strategy that asks managing agents to accept no new business on thermal coal-fired power plants, thermal coal mines, oil sands or new Arctic energy exploration activities from 1 January 2022 (though this does not apply to the type of coal to be extracted at the Cumbria mine: coking coal for the steel industry).

 Against this backdrop will the mine be able to attract support from the insurance industry?

 A crowd-funded legal challenge to the approval of the mine is already under way with an action by SLAC – South Lakes Action on Climate Change.

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