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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.
Posted 23 June 2021 by Amena Saiyid, Senior Climate and Energy Research Analyst
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