Chennai, November 16th : .General insurance companies in India, China and Indonesia, which are part of Asia-Pacific countries, will adopt a gradual approach to reducing exposure to coal-related industries.
This is according Moody’s Investors Service, in a recent report. According to Moody’s, the plan of Asia-Pacific (APAC) insurers to curtail or even cease underwriting and investment exposures to coal or coal-related industries are credit positive, although their coal exposures are generally small.Moody’s says that the APAC plan to reduce or stop investment exposures and underwriting in coal-related sectors is credit-positive, even though their coal exposures tend to be small.
According to Moody’s, such initiatives will reduce insurers’ potential liability risk from weather-related claims and stranded asset risk, where insurers’ coal-related investment assets will lose economic value.Moody’s claims that such measures will lower insurers’ exposure to weather-related claims, stranded assets risk and potential liabilities, while insurers’ investments in coal will suffer economic loss.
“APAC economies’ coal dependency will drive insurers’ pace of coal reduction.
The insurers will be driven by the pace of reduction in coal use in APAC countries.China (A1 stable), India (Baa3 stable), Vietnam (Ba3 positive) and Indonesia (Baa2 stable) are more dependent on coal than other APAC economies for their energy consumption.
China (A1 stable), India, Vietnam (Baa3 stabile), Indonesia (Baa2 steady) are all more dependent upon coal for energy than the other APAC countries.As a result, insurers in these economies are more likely to take a gradual approach in reducing their coal exposures,” said Young Kim, a Moody’s analyst.
According to Young Kim, an analyst at Moody’s, these countries are more dependent on coal than other APAC economies.As such, insurance companies in them will likely take a slower approach in decreasing their coal exposures.
By contrast, insurers operating in economies with low coal dependencies, such as Japan (A1 stable), and Korea (Aa2 stable) will take a more progressive approach to lowering coal exposures.In contrast, insurance companies that operate in countries with low coal dependence, like Japan (A1 steady) and Korea (Aa2 stabil), will adopt a progressive approach to decreasing coal exposure.
Meanwhile, the speed at which different economies can reduce their existing carbon exposure will vary.Nevertheless, each country will have a different speed limit on how quickly they can lower their carbon emissions.
This will especially be the case where these economies need to balance environmental concerns that drive carbon emission initiatives with broader policies and socioeconomic considerations.These economies will need to find a balance between environmental issues that lead carbon emissions initiatives and wider socioeconomic considerations.
Foreign insurers operating in APAC markets could incorporate their parent companies’ broader environmental social and governance commitments in their local underwriting and investment practices regarding coal-intensive sectors.APAC market foreign insurers could include the environmental and social governance obligations of their parent companies in local investment and underwriting practices.
These insurers, with their considerable financial strength and Asian market presence, will influence APAC insurers’ efforts to reduce coal exposures, especially among local, smaller insurers, Moody’s said.Moody’s believes that these insurers will have a significant impact on APAC’s efforts to decrease coal exposures.
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