Trans Mountain "confident" in hitting $500 million insurance deadline

It must secure coverage by the end of the month

Trans Mountain "confident" in hitting $500 million insurance deadline


By Jen Frost

Trans Mountain is “confident” it will secure insurance coverage by a critical August 31 deadline, despite 18 insurers having ruled out underwriting the project and continued activism targeting it, the corporation told Insurance Business in an emailed statement.

Trans Mountain also committed to “providing the Canada Energy Regulator with full information about our financial resourcing and ensuring Canadians know that we are sufficiently insured.”

The deadline for the controversial Trans Mountain pipeline to secure $500 million in insurance cover is approaching at the end of this month, and climate activists have stepped up efforts against insurers in a bid to stop the project in its tracks.

The Trans Mountain pipeline expansion project was approved by the Canadian government, which has owned it since 2018, three years ago.

The expanded crude and refined oil pipeline is expected to grow government revenue by $46.7 billion during construction and in its first 20 years of expanded operations, the project has forecast. Described by Trans Mountain as a “twinning” of the existing 1150km pipeline that runs through Alberta and British Columbia, it is expected to nearly triple the pipeline’s nominal capacity to 890,000 barrels per day.

However, activists have argued that the project is running grossly over budget – it was initially estimated at $5.4 billion in 2014, and this has since ballooned to $21.4 billion – and taken umbrage with a $10 billion loan guaranteed to the project by the federal government in May.

They have also alleged that expansion has been carried out without indigenous consent and in conflict with Paris Agreement targets.

Trans Mountain has proven a headache for insurers, and activists have not been afraid to single out CEOs.

Eighteen (18) insurers have so far ruled out covering the project or tar sands projects in general, according to campaign group Recent big names to back out include Aspen and Arch, and they’re joined by global big hitters Zurich, Chubb, and Munich Re among others.

In a letter to the Canadian Energy Regulator in March 2021, Trans Mountain confirmed it had already seen a “significant reduction in available insurance capacity” and was looking at paying a “significantly higher cost” for cover.

As a result of confidentiality granted by the regulator, the firm’s insurance certificates have not been publicly available in an unredacted form since 2020. However, activists have continued piling pressure on insurers that have yet to rule cover out.

In a “week of action” beginning August 22, the latest in a sustained series of protests from multiple groups across the globe, campaigners targeted Liberty Mutual and other insurers that have not yet said they will not back the project.

Campaigners from and other groups delivered a 250,000-strong petition to the known past underwriter of the project, calling on it to publicly cut ties with Trans Mountain.

Events will continue at “about half a dozen” Liberty Mutual offices across North America over the week, a spokesperson for confirmed on Tuesday, including Denver, Toronto, Seattle, and at its Boston HQ.

“We don’t know who was on last year’s certificate,” Sven Biggs, Canadian oil and gas program director told Insurance Business. “But we know that Liberty Mutual, in addition to insuring this project, has insured a number of other pipelines in Canada, including the very controversial Coastal GasLink pipeline across northern BC.”

Select Lloyd’s underwriters and CNA Hardy are also targets of this week’s action, Biggs confirmed.

“Legally, the project can’t go forward without insurance, they have to have over half a billion dollars in coverage to meet a requirement from the Canadian Energy Regulator,” Biggs said.

“We’re targeting insurance companies, because, of all the financial sectors, they’re some of the folks that are most aware of the impacts of climate change.”

In a 2020 report, the Insurance Institute of Canada found that average annual severe weather claims paid by Canadian insurers could more than double over the following 10 years, from $2.1 billion to $5 billion.

This would be due to growing numbers of people and assets in at-risk areas, the institute said, but buoyed by aging infrastructure and an increase in the frequency and severity of weather events.

“The companies that are holding out, like Liberty, they are choosing short term profits over protecting the stable climate and protecting the communities that live along this pipeline road,” Biggs said. “And we think that that is dangerous and short-term thinking.”

Liberty Mutual did not respond to a request for comment on the activist actions or its status with Trans Mountain.

For Trans Mountain’s part, it added in its statement: “We are committed to working with governments and stakeholders to advance strategies that will reduce emissions along the energy value chain.”

“Trans Mountain expects that in the future, renewables and clean energy will make up a greater mix of our energy supply, but the reality today is that we still rely on fossil fuels for the majority of the world’s energy needs,” it said.

“That doesn’t mean that we aren’t looking at ways to minimize, reduce and offset impacts. Canada’s energy industry is investing billions in new technologies and innovation that will help further reduce carbon emissions.”

It said it was “in support” of efforts to achieve net zero by 2050, and would “develop and communicate our plan to achieve this goal in the future.”

“The Trans Mountain Expansion Project proudly embodies unprecedented levels of involvement, and shared decision making, with indigenous peoples and communities,” it added, pointing out that 11% of the project workforce is indigenous and Trans Mountain has close to 4,000 contracts with indigenous businesses and partnerships worth over $2.7 billion. 

“Route changes and new construction techniques have been undertaken as a result of continuous indigenous engagement and the project now has Mutual Benefit Agreements with 69 indigenous communities,” it said.

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