Insurers urged to avoid new oil and gas projects
Insurers and reinsurers are being urged not to insure or invest in companies that plan new oil and gas production.
A campaign that has played a part in persuading sections of the insurance industry, including some Bermudian-based companies, to withdraw cover for coal projects, has widened its scope to include new oil and gas projects.
The shift away from coal by insurers has been welcomed by the Insure Our Future campaign, which was formerly known as Unfriend Coal. Today it published its fifth annual scorecard on insurers’ climate policies, which identifies those it considers the leaders and laggards when it comes to taking action to help meet international climate targets.
The number of insurers withdrawing cover for coal projects is now 23, an increase of six in the past year. Companies that have ended or limited cover to coal projects represent 12.9 per cent of the global primary insurance market, and just under half of the reinsurance market.
Since the campaign was launched in 2017, it has seen at least 65 insurers, with combined investments worth $12 trillion, either adopt divestment policies towards coal, or committed to making no new coal investments.
Peter Bosshard, campaign coordinator, said: “Insurers’ continuing shift away from fossil fuels is positive, but in the face of a worsening climate crisis it needs to accelerate. Laggards like Lloyd’s, AIG and Tokio Marine must stop insuring coal now, and all insurers need to phase out support for the oil and gas industry.”
For the first time, the Insure Our Future scorecard has evaluated insurers’ commitments on oil and gas. Nine have limited or ended cover for tar sands oil, up from four last year.
The campaign said burning coal accounts for 40 per cent of non-land use CO2 emissions, while oil and gas combined is responsible for 55 per cent. It is pushing for the insurance industry to act on oil and gas, particularly any new projects.
The multi-organisational campaign aims to help limit any global temperature rise to 1.5C above pre-industrial levels, one of the targets of the 2015 Paris Agreement, which was signed by 196 countries.
The Royal Gazette asked Mr Bosshard if it was a realistic to expect the insurance sector to pull away from the oil and gas industries, which play a key role in providing the energy needs for much of the world.
He said: “We have more time to phase out oil and gas than coal. With technological progress that we are seeing we can electrify everything, so we can transition away from oil and gas over time, but we can’t afford to expand oil and gas production.
“We need to start moving away from it. With the evolution of electric vehicles and home appliances, that trend is starting. We can’t afford to expand oil and gas now, because that capacity would continue to produce emissions for decades.”
He added: “So how realistic is it? Oil and gas is a bigger market than coal, so there is more premium revenue at stake. But several major insurance companies have committed to a 1.5C pathway: Zurich, Allianz, Axa, Swiss Re, Munich Re – those are leading asset owners/institutional investors and seem serious about making this transition happen. So, as with coal four years ago, they need to take the first step. And if they coordinate it within this group, and say ’okay, let’s move together’, they could send a strong signal and have a major impact on oil and gas insurance.”
In the updated scorecard from Insure Our Future, Axa is ranked top for its stance on fossil fuel insurance, and second for fossil fuel divestment, while Bermudian-based Axis Capital is also among the leaders. The “laggards” listed towards the bottom of the table include Sompo, American International Group, and Lloyd’s.
Legal and General, which has its reinsurance offices in Bermuda, comes top in the “other climate leadership” rankings.
Mr Bosshard said it was encouraging to see continuing momentum in the number of insurers and reinsurers pulling away from the coal projects.
“We were initially concerned that the Covid-19 crisis would stop this trend, and would concentrate people’s minds on the pandemic completely,” he said. “We don’t have the luxury to focus on only one crisis at a time. But as the year progressed we saw that insurance companies understand that they need to act on this. We’ve seen several more commitments this year, and we have also seen signs from the laggards that they see the writing on the wall – and we expect to see them move within then next year.”
Mr Bosshard said Lloyd’s is expected to make an announcement on coal insurance this month, and added that insurers in Japan also seem to understand that the situation is untenable.
He added: “AIG, the last very big insurer, after Lloyd’s, from the western countries that hasn’t done anything yet – they are going through a leadership transition right now, so that adds to the chance that they might reconsider things.
“Overall we are pleased with the momentum we see on coal. We can pretty much make it uninsurable within another year, but we need to see the same momentum now in oil and gas, particularly new oil and gas production, which we can’t afford if we are to have a chance of limiting global warming to 1.5C.“
• Click on Related Media for a PDF of the IOF report
You must be Registered or to post comment or to vote.
