Some of the top insurers of coal-fired power plants under development in South Korea, representing $24.9 billion in underwriting, are unwilling to guarantee either the construction or the operation of new projects, according to Seoul-based nonprofit Solutions for Our Climate.
DB Insurance, Hyundai Marine & Fire Insurance, Hanwha General Insurance, and Hana Insurance—which represent nearly half the sector’s $52 billion of underwriting—made their plans known to the “Korean Beyond Coal” campaign, which disclosed them publicly 22 June.
The four insurers will neither back construction nor operation of new coal-fired capacity, including the 2.1-GW Samcheok Blue Power facility, which is set to be the country’s last coal project following a promise from the current Moon administration to phase out new coal-fired generation and a pledge to reach net-zero carbon levels by 2050.
The campaign, comprising a network of civic groups including Climate for Our Solutions advocating for coal-fired power to be phased out by 2030, reached out in recent weeks to the country’s 11 top insurers to persuade them to stop underwriting projects that generate GHG emissions.
Collapse of ‘coal-insurer cartel’
In a 22 June statement accompanying the announcement, Yuang Peng, climate researcher at Solutions for Our Climate, called the companies’ plans to exit coal “a major step” that indicate “the collapse of the coal-insurer ‘cartel’ in Korea.”
“Korean insurers tend to participate in high-risk projects like coal power plants as a consortium to minimize the risk. Having four of them fall out of the coal insurance market means even higher liability for the remaining insurance companies, making coal projects undesirable for everyone involved,” Peng wrote.
The announcement follows two weeks after UN Secretary-General António Guterres exhorted the Insurance Development Forum (IDF) to align its members’ portfolios and investments of around $35 trillion with goals to limit global warming to 1.5 degrees Celsius above pre-industrial levels. Formed in 2016, the IDF is a partnership between the United Nations, the World Bank Group, and the insurance industry to promote greater use of insurance and risk management tools in building resilience to natural disasters, including those fueled by climate change.
“We need net-zero commitments to cover your underwriting portfolios, and this should include the underwriting of coal—and all fossil fuels,” Guterres said 8 June, adding that the upcoming UN COP26 meeting in November “must signal an end to coal.”
No to renewals or new contracts
Typically, an existing insurance contract lasts a year. The four companies cannot legally withdraw from existing contracts for projects, but they have “agreed not to enter new or renew insurance contracts for existing plants or ones that may begin operations soon,” Jessica Yun, a spokeswoman with Solutions for Our Climate, told Net-Zero Business Daily 23 June.
According to data collected by Korean National Assembly Member Soyoung Lee’s office, which the campaign shared, Samsung Fire & Marine Insurance holds South Korea’s largest coal underwriting portfolio at $13.26 billion portfolio, and is followed DB Insurance at $10.56 billion. Hyundai Marine & Fire is ranked third at $9.38 billion, Hanwha General Insurance sixth with $3.24 billion.
DB, which was the first South Korean company to commit to coal divestment in 2019, told the campaign it also would consider retracting coverage for existing operations, while Samsung indicated it would not underwrite any new coal-fired power plants.
IHS Markit data show South Korea has seven coal-fired units with a combined capacity of 7.3 GW under construction.
The Samcheok power plant, which consists of two-coal-fired units, is most at risk and may face delays in coming online because the project developers still need to raise at least $1 billion in corporate bonds to complete its construction, which is less than halfway complete, Vince Heo, associate director in IHS Markit’s Global Power, Energy and Futures team in Seoul, told Net-Zero Business Daily 23 June.
Samcheok’s construction has slowed down, as the government determines its environmental impact. If the project is deemed against the public interest under legislation President Moon Jae-In’s government is crafting, it could be canceled if the legislation is approved, Heo added.
Other than Samcheok, Heo said, Gangeung Anin plants #1 and #2 also could be affected, but their construction phase is already more than 70% complete, while the remaining three units are all due to come online this year, Heo said.
At the Leaders Summit on Climate in late April, Moon announced the country would no longer finance overseas coal-fired power projects, and would stop issuing permits for domestic coal-fired power plants as well.
“To become carbon neutral, it is imperative for the world to scale down coal-fired power plants,” Moon said.