Technically speaking … it's about CO2 removal

The effects of climate change and global warming are already evident and shaking up our risk landscape: warmer average temperatures, rising sea levels, melting ice caps, longer and more frequent heatwaves, erratic rainfall patterns and 20°C November in the Northern Europe. These are just some of the weather extremes that we are witnessing. Tackling climate change and advancing the transition to a low-carbon economy are key topics for Swiss Re's business as a risk knowledge company.

Climate science tells us that our planet must be at net-zero green-house gas emissions by 2050 to keep global warming below 2°C. Exceeding this temperature will cause irreversible damage to the planet. At Swiss Re, we have committed to net-zero emissions on the liability and asset side by 2050, and in our own operations already by 2030. Net-zero means to curb as much emissions as fast as possible, and balance the remaining unavoidable emissions by taking carbon dioxide out of the atmosphere and store it permanently. This is what is called Carbon (Dioixide) Removal or CDR. Swiss Re's net-zero motto reflects exactly this sequence of actions:  "Do our best, remove the rest".

Considering that the majority of climate models predict the need to remove and store CO2 by 2050 in "gigatonnes", the carbon removal industry is expected to grow to the size of the current oil & gas industry over the next 30 years. This presents opportunities and risks for the insurance industry.

In order to understand this new and prototypical technology, we invited my colleague Mischa Repmann to talk to our clients about current trends in carbon removal technologies. Carbon removal approaches are not deployed at scale yet. The carbon removal industry is just about to emerge, and the insurance industry can accelerate deployment by offering risk transfer solutions. In fact, much of the carbon removal technical solutions' value chain– from capture to processing to transport and storage – overlaps with existing lines of insurance business, particularly in engineering. Thus, we can think how to best leverage or adapt our existing risk knowledge to serve the new industry with insurance offerings.

Let's be mindful, however, that carbon removal is no silver bullet to solve the climate crisis. It will not replace the need to move away from fossil fuels towards the clean energy system of the future. But the necessary carbon removal capacity needs to be built in parallel in order to indeed achieve net-zero emissions in 2050.  

My view on this is that engineering underwriters need to support this transition. In 2018, we introduced a thermal coal policy as a first step to decarbonize our underwriting portfolio. In 2019 we took a further important step and develop a policy to shift away from the most carbon-intensive oil and gas production. All the knowledge and expertise on this class of risks won't be lost.

For example, the technical carbon removal solutions that use underground geological reservoirs for CO2 storage will face similar challenges as the oil and gas industry when it comes to drilling. What is true for re/insurance is also true for the carbon-intensive industries that we cease to insure: often their skill set and experience can be applied to build and operate low/negative carbon facilities. It needs a strategic shift from these companies and from the engineering underwriting community to make it happen.

At Swiss Re we insure, invest, operate and share our knowledge in a way that tackles sustainability challenges and creates long-term value. Our vision is to make the world more resilient.

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