Steel’s decarbonisation has a capital problem. The solution starts with insurance

The green transition is set to catalyse the greatest capital reallocation in a century. But for steel, one of the hardest-to-abate sectors, the capital required to decarbonise will only flow if the risk can be transferred.

That is the argument I presented in Brussels last week for the World Steel Association’s Open Forum, grounded in the Geneva Association's recently published report on sectoral decarbonisation and insurance. As a member of the Geneva Association’s advisory committee, it’s a body of work I know well.

At a steel industry event, I was in some ways the odd one out as the insurance representative in the room. So, when I thought about the one thing I wanted people to leave knowing, I kept coming back to the report’s findings. The biggest bottleneck to steel decarbonisation isn’t ambition, and it isn’t technology. It’s capital.

The insurance gap in hard-to-abate sectors

The sheer scale of transformation required by the steel sector can’t be overstated. It’s responsible for producing around 1.9 billion tonnes of crude steel each year, with decarbonisation pathways that run through hydrogen direct reduction, large-scale carbon capture and storage, and electric arc furnaces powered by clean energy. These are capital-intensive, complex transitions, often involving nascent technologies.

Think for a moment about what a bank or investor sees when they look at a first-of-its-kind hydrogen direct reduction plant. This technology has never been built at scale. There’s no long track record of performance, nor a supply chain that even fully exists yet. In the event something goes wrong, that liability could run for decades. Without someone willing to stand behind those risks, the lender faces two choices: either walk away, or price the uncertainty into financing costs that then make the project unviable.

Insurance doesn’t add cost to that project - it removes barriers to innovation and investment. This distinction matters because the framing shapes everything that follows, including at which point in the project lifecycle insurers are brought into the room.

Early engagement is not optional

If an insurer first sees a hydrogen reduction project only after the site has been chosen and the equipment specified, it is too late to meaningfully shape the risk profile. The cost of cover, if available at all, will reflect that late engagement.

The Geneva Association report is unambiguous on this point. The current project finance model, where insurers are brought in after key decisions are fixed, must change. Early involvement improves asset design, reduces risk, lowers the premium and accelerates the financing timeline. For steel companies and their investors, this can mean the difference between a project that gets built and one that never makes it off the starting block.

This was echoed by the forum’s opening panel, where Dr Maryam Golnaraghi presented her research findings that rising costs and difficulty securing cover already handicap industrial project development. The energy transition, however, has been here before.

The offshore wind parallel

Twenty years ago, offshore wind was an emerging technology with a similar capital problem. It was a novel technology with thin risk data, and lenders priced their uncertainty into financing costs that made many projects marginal.

Founded upon GCube's decades of experience in renewable energy underwriting and claims, and with expertise drawn from across Tokio Marine's global operations, Tokio Marine GX, made the decision to engage early, to build knowledge alongside the technology, and to help develop the standards and frameworks the market needed. Over time, that early engagement has helped unlock investment at scale. Offshore wind is now one of the most actively insured sectors in the energy transition, with deep market capacity and sophisticated cover frameworks.

Steel's decarbonisation needs to chart the same path, but it can’t wait a decade while the first hydrogen direct reduction plants are already built, and risk frameworks are being invented under time pressure.

The green transition in steel will require enormous investment. Insurance doesn’t consume that capital, it enables it.