Japanese insurer Tokio Marine has set up a unit to insure activities linked to the low-carbon transition such as green hydrogen, shipping and cement and is targeting $1 billion in revenues by the end of the decade, its chair told Reuters.
The new unit, Tokio Marine GX (TMGX), will provide advisory and risk transfer services to companies across a range of sectors looking to decarbonise, and build on the existing work of its GCube renewable energy team, Fraser McLachlan said.
TMGX will offer up to $500 million in cover on any single risk and is targeting at least a 10% share of the global premium income market in 2030, estimated at around $10 billion, he said.
While some peers had already begun to write more transition-linked business, most had done so using existing sectoral teams rather than creating a dedicated unit, he said.
“We’re going to rip up the rule-card a little bit here,” McLachlan said.
“We’re going to look at some new technologies, we’re going to look at more sophisticated ways of being able to risk transfer business,” such as offering insurance for tax credits and surety guarantees.
Launching with existing GCube headcount of around 50 and revenue of around $200 million, both would likely double over the next couple of years, he said. Parent Tokio Marine is the largest property and casualty insurer in Japan with a market value of around $70 billion.
Among the new technologies TMGX would look to cover include small and middle market nuclear, hydrogen, fuel cells, new solar technologies including floating solar and electric vehicles, he said.
“There’s a lot of sectors that really haven’t been served by the insurance space,” McLachlan said.
Another area ripe for extra help was the market for tax credit insurance, where businesses get cover in case they are unable to access the credits as planned, thereby lowering their risk to bank lenders and the interest rate on borrowing.
“It’s a win-win. Lenders love it as it transfers their risk; we like it, we’re getting a premium for a risk we’re comfortable with; and it allows the project to be financed at more equitable terms.”
The company could also look to strike deals with managing general agents, intermediaries given authority by the insurer to write business in their name, saving them the time and expense of building out a team.
“It’s a pretty quick win… it allows you instant access to a market,” McLachlan said.
Finding more innovative ways to finance the risks associated with the transition was critical if the world is to hit its climate goals.
“Unless people start coming to the table with more creative insurance solutions … we’re going to see a lot of these projects stall,” he said.
(Editing by Mark Potter)
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