Beazley, the largest managing agent at Lloyd’s of London finally decided to publicly disclose its fossil fuel policy. (1) It comes just a few days before Reclaim Finance released its report benchmarking the fossil fuel policies of its largest managing agents and more than two years after Lloyd’s of London’s first ESG guidance on fossil fuels. In March 2023, Beazley publicly committed not to insure new thermal coal projects, new tar sands and Arctic energy exploration projects and companies which generate more than 5% of their revenues from these activities. A first step which falls short of its net zero ambition. Beazley must now address more widely the issue of fossil fuel expansion by adding to the scope of its fossil fuel policy the exclusion of all new upstream oil and gas projects.
Key updates of the policy
No new coal, tar sands and Arctic energy exploration projects
Beazley committed not to insure any new thermal coal, oil tar sands, or Arctic energy exploration projects as of January 2022 in line with Lloyd’s encouragement to implement fossil fuel guidelines for its managing agents. (2)(3)
5% revenue threshold for companies in certain fossil fuel sectors
Beazley also committed not to cover companies which generate more than 5% revenues from coal, tar sands and Arctic energy exploration activities. Beazley indicates it will apply exemptions to the above-mentioned commitment for two business lines until 2024 : Marine (4) and Political Risks (5) policies.
Our analysis
THE POSITIVES
Beazley finally follows Lloyd’s of London’s fossil fuel guidelines
With the major part of its business driven by its subsidiary at Lloyd’s, (6) Beazley Furlonge, the largest managing agent on the market, becomes the 12th out of the 20 largest managing agents to align its fossil fuel underwriting business with Lloyd’s guidance on coal and the 11th to apply Lloyd’s guidance on tar sands and Arctic oil and gas. Beazley goes a little further than Lloyd’s by setting an exclusion threshold for companies with more than 5% of their revenues derived from certain fossil fuel activities. However, a threshold based on revenues does not make it possible to identify the companies most exposed to the non conventional sectors, unlike a threshold based on production which really focuses on their core business: extracting oil and gas. Beazley must switch from a revenue-based metric to a production-based metric especially when analyzing the largest integrated oil and gas companies such as Exxon Mobil, TotalEnergies, Chevron, Shell or BP. These companies, among the world’s largest oil and gas developers, are all involved in unconventional oil and gas production. (7)
NEXT STEPS
Extend the underwriting restrictions to new upstream conventional oil and gas projects
Beazley’s oil and gas commitment only applies to energy exploration projects (8) in two unconventional sectors: tar sands and Arctic. IEA’s latest recommendations not to develop new oil and gas fields to reach net zero emissions by 2050 do not only apply to tar sands and oil and gas fields located in the Arctic area. These upstream projects only represent around 10% of short-term oil and gas expansion while new upstream conventional oil and gas projects are responsible for 52% of global short-term oil and gas expansion. (9) At the very least, Beazley must follow the example of its competitors in the Lloyd’s market: Munich Re Syndicate and Argenta Syndicate Management read carefully the latest IEA’s conclusions and implemented them by committing not to insure any new oil and gas fields, either conventional or non-conventional.
Offer greater transparency
Beazley must be more transparent about its fossil fuel policy to demonstrate that there is no major loophole in its commitments. Beazley must disclose the list of insurance products (10) to which its commitments apply but also the different business lines affected. Beazley also needs to specify if its fossil fuel policy applies to both insurance policies provided to new clients but also the renewal of existing insurance policies.
Finally, Beazley does not share its definition of the Arctic territory. Many different definitions of the Arctic area could be set such as the Arctic National Wildlife Refuge, the Arctic Circle or the Arctic region defined by the Arctic Monitoring and Assessment Programme (AMAP), the broadest scope which includes the other two mentioned above. Reclaim Finance advised Beazley to adopt the latest definition of the Arctic region, known as the best practice among insurers. (11)
Reclaim Finance welcomes Beazley’s first commitment regarding coal, tar sands and Arctic oil and gas. However, these announcements do not live up to its net zero commitment. We call on Beazley to adopt further measures to align with best practices in the Lloyd’s market, as defined by Munich Re and Argenta managing agents, and with the IEA NZE’s projections regarding the end of new oil and gas fields and new LNG terminals.
For more information regarding Beazley’s sectoral policies on coal and oil & gas applying to its subsidiary Beazley Furlonge, you can refer to the following tools : the Coal Policy tool and the Oil and Gas Policy Tracker
