According to the rating agency AM Best, Scor is the fourth largest reinsurer in the world. In other words, it is a heavyweight in the sector. However, Scor is on the verge of falling behind its European competitors on the environmental front, where Scor’s stated ambition still clashes with the reality of its (non)commitments. This raises questions, given that Bruno Le Maire has already asked French financial actors to adopt coal phase-out plans.

So, let’s take a look at what the absence of strong measures from Scor to tackle climate change could imply at a time when even the IEA has announced that no new investments in fossil fuels should be made. The appointment of a new CEO seems like the perfect time to turn the page on coal.

Scor’s contradictions on climate

On the investor side, Scor has a robust and exemplary coal policy. Similarly, it is also through its international commitments that Scor wishes to put forward its climate voluntarism: it is already a member of the Net-Zero Asset Owner Alliance, and is now part of the select group of (re)insurers who initiated the Net Zero Insurance Alliance.

However, these net-zero commitments and related support seem small in comparison to the near absence of measures concerning the oil and gas sector and its expansion: Scor can still support new projects in the sector and companies developing such projects in the sector without limit. This seems anachronistic at a time when even the IEA says that no new projects should be funded.

Similarly, the near-absence of commitments for its insurance activities is problematic and… inconsistent. The contrast between Scor as an investor and Scor as an (re)insurer is striking. If on the one hand, the end of coal has been slated on a timeline compatible with the Paris Agreement ,and if any support to coal expansion is now banned, on the other hand, on the reinsurance side, only meager measures concerning new projects have been taken. However, there is nothing concerning developers, no planned exit date, nor any exclusion of the most coal-dependent players. In short, investing in coal, that’s a no, but insuring it, no problem.

Reinsurance treaties: a weak point 

Moreover, when we look at the meagre commitments made on the insurance side, there again, flaws appear. In the words of its new Executive Director Laurent Rousseau: “a little over 75% of gross insurance premiums”, in the form of reinsurance treaties, are not covered. This implies that, despite its commitment to no longer insure new coal-fired power plant and mine projects, Scor could still be involved in covering a large number of them.

If until now Scor could argue that it was unable to act on these treaties, where it is intrinsically more difficult to isolate and exclude specific coverage of risks related to coal projects or companies, Swiss Re’s decision of April 2021 shows that Scor has fallen behind. Indeed, the Swiss reinsurer, world leader in the sector, has announced the application of its coal policy to all its reinsurance treaties by 2023, and Munich Re and Hannover Re, the 2nd and 3rd largest reinsurers in the world, are preparing to follow suit.

If the reality of the reinsurer’s business consists, as Laurent Rousseau expressed it, of managing what can be measured (“what gets measured gets managed”), it seems that Scor is one step behind its direct competitors. The latter now believe that they have the capacity to know in sufficient detail the content of their reinsurance treaties to be able to isolate the coal business. In other words, this could reflect a better measure of the financial risk they are exposed to, which is increasingly a climate financial risk.

According to Scor’s annual report, “the challenge of the reinsurance business is to identify, select, assess and price risk”, Scor’s competitors seem to be ahead of the game.

A new executive director to drive a new climatic dynamic?

The question that now arises is whether, faced with a crossroads in terms of its leadership and its sector, Scor will catch up. Indeed, beyond the purely climatic issues, it is also Scor’s economic profitability and financial solidity that could be questioned in the future. Indeed, Scor itself writes that “if SCOR’s rating were to be downgraded, […] this would result in a loss of competitiveness for SCOR”, even though “a large number of SCOR’s reinsurance treaties […] contain clauses relating to the financial strength of the Company” (Universal Report 2020, p.128). In fact, the increase of natural catastrophes Scor had to compensate victims for (+33% between 2019 and 2020) weights on Scor’s economic performances: €483 million paid in 2020, twice as much as Scor’s annual results (Universal Report 2020, p.6 and 27).

In other words, a poor assessment of the risk, in this case climate risk, to which Scor is exposed via its reinsurance treaties could have a major impact on the company’s business model. It is therefore hoped that Laurent Rousseau, who is to become the group’s new Executive Director at the Annual General Meeting, will put Scor back on the path to climate leadership. The answer will come in September at the launch of the Net-Zero Insurance Alliance, where strong individual and collective commitments from each of the alliance’s founding members are expected. Climate will be the litmus test of his leadership.

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