Big Oil and its allegedly exclusive role in bringing about apocalyptic climate change has been the ultimate villain in the eyes of climate activists. Calls for a forceful death of the industry have become the norm, and protests against oil and gas production are an everyday occurrence in the West.
But activists are not only targeting their ultimate villain directly. They are also attacking proxy industries such as banks, which lend to the oil and gas industry. The offensive is yielding results: bank after bank pledges an end to funding for new oil and gas projects. Besides banks, however, there is another major pressure point activists are targeting: insurance.
Last summer, a group of climate activist organizations organized protests against nine insurance companies, calling on them to refuse to provide coverage for the Eastern African Crude Oil Pipeline project.
The EACOP has, since its inception, been a huge problem for environmentalists, who have cited the inevitable increase in emissions from the production and transportation of oil along the new piece of infrastructure and the risk of spills. To prevent all this, they chose to pressure the insurers of the project. And it worked.
A total of 28 insurance companies so far have declared they would not partake in the insurance of EACOP, the East African reported earlier this month. The reason for this unwillingness to work with the oil industry—climate activist pressure.
As a result of that pressure, EACOP is, per the above report, hanging in the balance because there are not enough local insurers that can shoulder the burden of such a massive project. Chinese insurers are an option, but they are in no hurry to decide. In the meantime, Uganda's oil sits in the ground.
From the perspective of the activists, this is a small win in a sea of losses. Euronews reported this month that U.S. insurers continue to provide coverage to the oil and gas industry, citing 2019 numbers from a survey done by a slew of climate advocacy organizations. The survey showed that U.S. insurers held oil- and gas-related assets worth $536 billion as of that year, and the number for the next four years was likely to be similar, according to them. The solution to this perceived problem? Protests.
Radical environmentalists from Extinction Rebellion are currently launching a week-long series of protests targeting the insurance industry in London in a bid to get their message across. The message: stop "enabling" the oil and gas industry.
"If fossil fuel companies have no insurance for their massive projects, the entire financial risk falls on their shoulders, so if something goes wrong, they are liable for whatever happens," one Extinction Rebellion member explained to Euronews.
The explanation echoed an earlier one offered by 23 climate NGOs in a letter to a group of large insurers last year. "Insurers, as society's risk managers, have a special responsibility to act and the power to drive change: without insurance most new fossil fuel projects cannot go ahead and existing ones cannot continue to operate," the climate activists wrote at the time.
Despite the pressure, insurers have not started fleeing the oil and gas industry—yet. Indeed, many of the largest ones are also among the biggest insurers of oil and gas projects, according to an annual survey by yet another climate activist group, Insure Our Future.
Eight of the ten top individual insurers of oil and gas, the survey found, were from the West, with one insurer from China and Russia each also making the top 10 list. That included names such as Allianz, AXA, Zurich Re, and Chubb and AIG from the U.S.
In fact, according to the same group—Insure Our Future—80% of insurers and 53% of reinsurers do not have any restrictions on their business with the oil and gas industry. On the plus side, from the group's perspective, insurers have shrunk the business they do with coal producers, which has made it harder for the latter to secure coverage for new projects.
Yet it appears that this is nowhere near enough—neither the mass unwillingness among insurers to provide coverage for EACOP nor companies' pullout from coal. "Insurers have demonstrated that they can accelerate the shift away from fossil fuels through their coal exit policies," Insure Our Future said last November in a report cited by Bloomberg. "They urgently need to adopt similar policies for oil and gas."
If developments around the EACOP project are any indication, this might eventually happen, not least because there is a persistent argument that the insurance industry is suffering losses from increasingly frequent extreme weather that is caused by the use of the hydrocarbons that their clients from the oil and gas industry produce.
Insurers appear to believe that argument, which means they are halfway there when it comes to withdrawing from oil and gas. It may yet be a while before they start refusing coverage, but it is a distinct possibility, as losses from some severe weather events, such as thunderstorms, remain on a steady upward trajectory.
By Irina Slav for Oilprice.com
