The following is an editorial by Alicja Grzadkowska, senior news editor at Insurance Business. To reach out to Alicja, email her at [email protected]
The number of insurers providing coverage for controversial projects like pipelines and coal mines continues to fall, but many activists say that the sector still isn’t doing enough to separate itself from industries that have received a bad rap for polluting the planet.
Recently, insurers’ involvements in such projects has drawn ire again, as indigenous groups in Canada protested the Trans Mountain pipeline expansion at affiliated insurance companies (specifically AIG, Chubb, and Liberty Mutual), calling on them to stop backing the project, before the protests allegedly became violent at the hands of police.
Protestors’ fears about the environmental and social impacts of the Trans Mountain pipeline are far from unfounded – in June 2020, the Trans Mountain Pipeline experienced a spill in Abbotsford, BC, releasing as much as two rail tanker cars worth of light crude oil.
Activists’ fight against the project has clearly already been successful, as Trans Mountain Corp has now requested the Canada Energy Regulator (CER) keep the identities of its insurers confidential, according to a Reuters report. Growing pressure on insurers to step back from the project has caused insurance giants Talanx Group and Zurich to do just that, leaving Trans Mountain with dwindling insurance options.
In the meantime, a Munich Re subsidiary has announced that it will no longer insure the Nord Stream 2 pipeline from Russia to Europe, joining Zurich, which dropped out this past January. The key fear of insurers here is getting on the bad side of the US government, which has threatened to sanction European companies that support construction of the gas pipeline.
Read more: Munich Re drops Nord Stream 2 pipeline
These recent developments are just another step in the move away from pipeline and mining projects by insurers. In January, AXIS Capital confirmed in a letter to the Gwich’in Steering Committee – an organisation formed by Alaska’s Gwich’in Indian Nation to preserve the environment – that it would not provide insurance coverage or investment support to projects related to exploration, drilling, or the production of oil and gas in the Arctic National Wildlife Refuge.
Meanwhile, in Australia, climate campaigners from the Stop Adani campaign and Pacific Climate Warriors continue to call on Lloyd’s of London and its members to follow the lead of 23 major insurers in ruling out insurance for Adani’s Carmichael coal mine. If built, the coal mine is expected to add around 4.6 billion tonnes of carbon pollution to the atmosphere over its lifetime, the campaigners have argued. In fact, Lloyd’s of London insurer Brit recently ruled out providing insurance for the project and confirmed “that it does not plan to renew any risks involving any other associated with the project.”
However, many activists say that insurers aren’t doing enough on the climate front. When QBE Insurance Group published its Environmental and Social Risk Framework, part of which outlines QBE’s climate action strategy, it was criticised by many camps.
In the company’s framework, QBE said it will assess customers with 60% or more revenue from oil and gas extraction whether they are on a pathway consistent with achieving the Paris Agreement, and will not insure them if they’re not, but not before 2030. Experts have pointed out that this plan doesn’t move quickly enough on the issue of climate change, of which we’re already seeing the repercussions on our planet. A campaigner for the lobby group Market Forces said that the insurance group “is kicking the can down the road on climate action,” claiming that waiting nine years before making the abovementioned assessment, amid “the most urgent crisis humanity has ever faced,” is a complete abdication of responsibility on the part of QBE.
Indeed, it’s becoming clear that insurers need to take a clear stance on climate issues and draw a hard line in the sand, as some have already done, on not providing insurance to polluting projects, especially as these involvements exist in direct contrast to the industry’s broader move towards environmentally friendly initiatives. For example, the Geneva Association just established a new task force comprised of members of the P&C and life insurance industries to help develop climate risk assessment methodologies and tools, while Marsh & McLennan said it aims to be carbon-neutral this year.
More importantly, insurers need to take action faster, realising that the fight against climate change can’t be avoided any longer. Look at Lloyd’s of London, which has said that it would be ending new and existing investment in thermal coal-fired power plants, thermal coal mines, oil sands, and new Arctic energy exploration activities as part of its sustainability targets by 2022 and 2025, respectively. While it’s a step in the right direction, this is also the first time that the Lloyd’s market has set an environmental, social, and governance (ESG) strategy, which brings its own concerns and underscores the problem of insurers moving too slowly on this front.
Should they procrastinate taking appropriate actions when it comes to climate and environmental initiatives – as many are doing today – insurers risk bringing too little, too late to the fight against global warming.