Insurer warns oil companies about renewable energy

As renewable energy rises in importance, it poses a threat to oil companies.

So acknowledged the chairman and CEO of Marsh, the world's leading risk and insurance service firm, to executives of leading oil companies this morning in Dubai.

“The world’s desire for environmentally-friendly energy sources appears to be rising faster than global temperatures. This is a growing risk to all energy producers – one that goes well beyond a fire at a plant, or a tanker that runs aground. What’s important for you as large producers of hydrocarbons is to view this risk honestly and address it strategically," said Brian Storms, Chairman and CEO of Marsh Inc., at the opening of the Marsh National Oil Company conference in Dubai.

“The normal tendency would be a bias for action, where you might jump to a tactical, defensive position. But there is a ‘new world’ view of risk – specifically, how to find opportunity in the kind of global changes we’re seeing… where risks and potential liabilities can be turned into a competitive advantage over those companies that don’t move to address them.”

In his speech, Storms cited the example of a major energy client, with significant assets in the northern hemisphere, which undertook a comprehensive risk assessment and prioritization exercise. While previously the subject of climate risk had only been an abstraction, the review found that potential impact of climate change represented massive exposures.

With many facilities situated either on areas of permafrost or in proximity to the arctic ice shelf, a potential thawing induced by climate change would present significant risk. Understanding this risk and prioritizing its potential impact allowed the client to take measures to address it.

Storms also cited other potential risks faced by national oil companies, including terrorist acts, the effects of a major natural disaster on production, the concentration of supply chains – especially due to the threat of avian flu and other risks.

“Frankly, insurable risks, while frequently complex, are the easiest to plan for. Uninsurable risks – climate change, for example – require far more foresight and creative solutions.”

Reached in Dubai by the Cleantech Group, Mike Kachel, Managing Director of Corporate Communications for Marsh, agreed that the combination of global warming and the rise of renewable energy sources made for a risky time for all traditional energy companies.

"The world is beginning to become more concerned about climate change. It would be prudent for all energy producers, not just oil companies, to understand their footprints in the world, and that there will be more constituent groups that will produce more challenges than the past."

"It's important to look at risk management differently, as more than just simply a transaction," he said.

Marsh is the world's leading risk and insurance services firm, with 26,000 employees and annual revenues approaching $5 billion.

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