One is a risk expert, the other involved in insurance valuations. Both visit companies almost daily. To assess risks or to draw up valuation reports. As a result, they see more than they like. "It often goes just fine, but too often it doesn't." Jurjen Burghgraef (Burghgraef van Tiel) and Harm Koch (Troostwijk) led the sub-session Insurability of the energy transition during the Damage Afternoon and conjured one practical example after another from their top hats.
Burghgraef started with a sheet from a government website: The Netherlands circular in 2050. And by 2030, fifty percent less use must be made of raw materials. "Serious tasks for the recycling industry and they often have to do that without insurance. That reuse of raw materials, who does anything with it?"
Only a handful of insurers raise a hand. He doesn't say it out loud, but he shows that he understands that reluctance. "In 2018, there was a spike in the number of fires at recycling companies. Insurers have had to pay out millions. There was even one that lost a million a week."
Laughing gas
His next sheet can only be explained in one word: chaos. Waste is in one heap, installations are visibly not in order and the architectural measures also leave a lot to be desired. Technically, it certainly doesn't deserve the beauty prize. "So why are there companies that build and work like this? Because it is allowed according to the Building Decree."
Burghgraef then hits the nail on the head as he zooms in a little further on the pile of household waste. "Do we even know what's in there?" He looks into the room when he asks: "who has children between the ages of 16 and 25? And who dares to tell them they use nitrous oxide?" He also proudly raises his own hand into the air. "Mine have done that before. I was there myself. In the pub. The whole floor was full of balloons. When I talked to them about it, I got the answer: that's laughter! They have no idea that this is a serious problem. What do you think happens when those things pop in the incinerators or in the garbage trucks?"
"What do you think happens when those nitrous oxide balloons pop in the incinerators?"
Prevention pays off
At the end of his speech, Burghgraef also has a positive example. He shows a picture of a big fire. He then shows two different photos of wall separation and asks the audience if they see the difference. "This one company spent 250,000 euros more on the walls per separation than was necessary according to the Building Decree. It saved about four million in the damage on the other side of the wall. If recycling companies technically comply with the principles, the risk of fire is significantly reduced. In addition, starting fires are more manageable and the damage can often be limited."
Light at the end of the tunnel
According to Burghgraef, there is light at the end of the tunnel. "With the help of insurers, investments can be made faster. Of course, damage will remain, but with the right premium and sufficient prevention, the risk is insurable and ultimately something can be earned. If insurers in co-insurance tackle this together, we can speed up the process of reusing the raw materials. And we are also getting closer to the goal of a one hundred percent circular economy. Of course, taking into account a high level of prevention, because a fire is always bad for the environment."
"More and more often, the calculation 'value before - value after' fire results in a shortage"
Problems after the fire
Harm Koch (Account Director Troostwijk) in turn mainly discussed the extra costs for sustainability. "The purpose of fire insurance is clear: to compensate the insured after a fire and to guarantee continuity. In other words, enough must be paid for rebuilding. But more and more often, the calculation yields value before and value after a fire a shortage. Why is that? The energy transition is going very fast. And although the government has created all kinds of rules, it is not always clear what you have to comply with for a damage. We only see these problems when the calamity has occurred and you have to meet all kinds of applicable requirements in the context of the energy transition in order to obtain a new environmental permit."
Indexation
The causes are multifaceted, Koch notes. "Is the sum insured correct? If you want certainty, make sure you have an independent valuation. Other causes may be that expansions/investments have not been implemented on time or incorrectly. And one of the biggest causes is, of course, indexation, and the price shocks that result there. The same applies more or less to the costs of the energy transition. You will only have had a major damage in March last year and now have to deal with rebuilding value. Then it suddenly turns out that you are no longer allowed to burn with gas and a much more expensive heat pump is needed."
Do it together
Koch called on the insurance industry to work together to find solutions to ensure that risks remain manageable and the continuity of policyholders is guaranteed. "Every party involved in the energy transition must take its responsibility. This applies to both the entrepreneur and the insurance industry. The company must know what it is doing and what it must do. The chain partners in our sector must provide the right information and point out the risks present. And finally, the insurance advisor has a duty of care. Sustainable insurance may go beyond sustainable investing and green recovery. We're not talking about converting from single to double glazing. That is precisely why we must do it together and look for future-proof solutions together."
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