Moody's: APAC insurers' pace to cut carbon exposures will depend on countries' coal reliance

(Hong Kong, November 16, 2021)--Asia-Pacific (APAC) insurers' plans 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, according to Moody's Investors Service in a new report. These 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.

"APAC economies' coal dependency will drive insurers' pace of coal reduction. 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. As a result, insurers in these economies are more likely to take a gradual approach in reducing their coal exposures," says Young Kim, a Moody's Analyst.

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.

Meanwhile, the speed at which different economies can reduce their existing carbon exposure will vary. This will be especially the case where these economies need to balance environmental concerns that drive carbon emission initiatives with broader policies and socioeconomic considerations.

Foreign insurers operating in APAC markets could incorporate their parents' broader environmental social and governance commitments in their local underwriting and investment practices regarding coal-intensive sectors. 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. (ends)