A little bit of legal expert opinion today prompted your IE Editor to consider the relentless rise of the Wokerati faction in Western societies. Should insurance companies, MGAs and brokers continue playing along with the ever-increasing list of demands from activists of all persuasions, or call a halt to some actions for the sake of their shareholders, and the staff working there who face unemployment if an insurer is cancelled for `wrongthink?’
The trouble with insurance is that it is a legal requirement when you start building power stations, extracting minerals or fossil fuels etc. But the tricky issue of insuring anything carbon or fossil fuel goes way beyond the legal or compliance T&Cs. The biggest emerging risk in 2021 is culture wars, not a coal train derailment or a rig fire.
Why? Because the issue at stake here and now is a moral one, not a natural catastrophe risk or even workers being injured on site. Social media has given everyone an opinion, and by expressing those same opinions mob-handed, activists force politicians to not only listen, but enact new rules and laws which have been framed by the angry brigade online for some years previously. The motion from all wokists in 2021 is simple; close all coal mines, stop pumping oil and gas and stop insurers from issuing cover for ANY projects which green activists don’t like.
You see, we all have to go greener. Drive electric cars, ride an e-scooter, set your washing machine on 30 degrees for just 10 minutes. Even if the batteries in solar panel installations, smartphones and laptops contain lithium, zinc and cobalt mined by shoeless children in the Congo, that’s OK, it’s saving the planet. We can always hold a demo outside the embassy when the weather improves.
Closer to home, the UK government wants to give the green light to a coal mine in West Cumbria. This is the area I grew up in and frankly, most of it is an unpleasant place to live. Apart from Sellafield there is very little well paid work available, unless you join the public sector.
The Woodhouse mine will create some decently paid jobs. The coal being mined also lies under the sea, so this isn’t a project that will leave a huge gaping hole in the landscape, like say a manganese, copper or zinc mine – all of which are essential to battery production. But the wokists say that the Woodhouse mine must NOT happen. Ever. What’s more, any insurer that underwrites the project will face the wrath of the pile-on mob online, with calls to cancel the brand. Probably cancel a few people too. Take their jobs, cars and homes, and ruin them by banning them from ever getting a decent job again.
As an industry, it would be foolish for insurers and other brands to ignore the level of hatred and persistent campaigning that is heading towards us over the next few years. It will be vicious, and in many cases, very personal. That’s how politics is now.
Insurance companies will each need to decide at what point do they give in, and become political campaign groups, rather than impartial insurers of risk? The thing is you see, that being politically correct as an insurer in modern times is rather like paying Danegeld in 920AD. There will be further demands. If you cancel all your coal and oil cover, do you then stop insuring diesel car owners, or pull your cover on someone who just tweets the wrong opinion, as AIG allegedly did recently when a former NBA player attended a Trump supporter rally?
This ends in McCarthyism or worse.
If your insurance brand is heading down that road, in the name of climate change and renewables, then fine, good for you, enjoy the awards champers and the brownie points on Twitter. But if you can accept that someone has to insure the sectors of the economy where brutal exploitation of people is the norm, like fast online fashion, or mining the materials required to manufacture cheap consumer electronics, then equally, someone has to insure a coal mine. Because morally, it is no different. In fact a Cumbrian coal mine will have far better standards of pay, safety and working conditions than any cobalt project in the Congo, or lithium extraction in Bolivia.
But then, maybe that more holistic view of mining doesn’t move the needle on your moral compass?
Woodhouse mine will test insurance industry’s commitment to climate promises
Nigel Brook, Partner, Clyde & Co
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.