Tokio Marine Launches Dedicated Unit for Low-Carbon Transition Insurance
Tokio Marine, Japan’s largest property and casualty insurer, has created a specialized unit called Tokio Marine GX (TMGX) to insure activities related to the low-carbon transition. The new unit aims to capitalize on the growing demand for insurance products that support decarbonization efforts across various sectors.
TMGX will offer advisory and risk transfer services to companies transitioning to cleaner energy sources and technologies. The unit builds upon the existing work of Tokio Marine’s GCube renewable energy team, led by Fraser McLachlan. “We’re going to rip up the rule-card a little bit here,” McLachlan said, indicating the company’s willingness to innovate and adapt to new technologies and risk transfer methods.
The new unit will provide insurance coverage of up to $500 million for single risks and aims to capture at least a 10% share of the global premium income market for low-carbon transition risks by 2030. This market is estimated to be around $10 billion. McLachlan noted that while some competitors have started writing transition-linked business, most have done so using existing sectoral teams rather than creating a dedicated unit like TMGX.
TMGX will focus on emerging technologies such as green hydrogen, advanced nuclear power, fuel cells, and floating solar. The unit will also explore insurance products for tax credits and surety guarantees, areas that have been underserved by the insurance industry. “There’s a lot of sectors that really haven’t been served by the insurance space,” McLachlan observed.
One innovative insurance product being considered is tax credit insurance. This type of insurance protects businesses in case they are unable to access tax credits as planned, reducing their risk and making it easier to secure financing at favorable terms. “It’s a win-win,” McLachlan explained. “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.”
TMGX is launching with around 50 staff and $200 million in revenue, both of which are expected to double in the next couple of years. The unit may also partner with managing general agents to quickly expand its reach into new markets.
The creation of TMGX highlights the growing importance of innovative insurance solutions in supporting the global transition to a low-carbon economy. According to McLachlan, finding creative ways to finance transition risks is crucial for meeting 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 warned.
Parent company Tokio Marine has a market value of around $70 billion, providing a solid foundation for TMGX’s ambitious plans. As the insurance industry continues to evolve in response to climate change, specialized units like TMGX are likely to play a key role in facilitating the global transition to a more sustainable economy.
