Only three of the world’s 30 biggest insurance companies have adopted policies to stop insuring new oil and gas projects, research has found.
The data comes from campaign group Insure Our Future’s annual scorecard. It was launched on 3 November at COP26 in Glasgow, where world leaders are meeting to discuss future climate action.
Politicians and campaigners argued that the findings showed the insurance industry was “abandoning climate leadership”. Insurers “have an opportunity to help lead the planet to safety” if they move away from fossil fuels, they said.
Not one of the world’s 30 largest insurers was given a score above five out of 10 for its actions to phase out fossil fuel insurance.
Among the companies found to still be covering new oil and gas are British giants, Lloyds of London and Aviva. They scored 0.9 and 1.8 out of 10 for their performance on moving away from fossil fuel insurance, respectively.
Insurance companies receive £13.6 billion ($18.5bn) a year in annual premiums from the oil and gas industry. The industry relies on insurance coverage to build and maintain drilling and mining operations, power plants and pipelines.
According to Insure Our Future, the insurance industry has known about the threat of climate change since the 1970s but continued to underwrite coal, oil, and gas projects.
In May 2021, the International Energy Agency announced that no new fossil fuel projects could go ahead if the world was to limit temperature rises to less than 1.5 degrees.
Big insurers in the US, Bermuda, and China are rated worst for underwriting fossil fuel projects this year. The scorecard also found that 10 insurers control about 70 per cent of the global oil and gas insurance market.
American and Bermudan companies are the last insurers still providing cover to the coal industry. A lack of willing insurers means that new coal projects are facing higher premiums and longer searches to find coverage.
As many as 35 insurers have stopped insuring coal since 2017, a move which French bank Societie Generale reported could add billions to their value.
We cannot avoid a climate catastrophe if we expand fossil fuel production.
Peter Bosshard, Insure Our Future
Peter Bosshard, global coordinator of Insure Our Future, said that insurers “need to stop insuring all new coal, oil and gas projects if they want to regain their credibility as climate leaders”.
He added: “The insurance industry is abandoning climate leadership by continuing to underwrite new oil and gas projects. We cannot avoid a climate catastrophe if we expand fossil fuel production.”
US Democratic Senator for Rhode Island, Sheldon Whitehouse said: “U.S. insurers continue to underwrite new oil and gas projects and invest in fossil fuel assets that pose a massive risk to the future of the planet, as well as to the insurance industry itself. Insurers hold a lot of influence over the future of fossil fuels, and they have an opportunity to help lead the planet to safety.”
The Association of British Insurers (ABI) stressed that the industry had a responsibility to support the “careful management” of carbon intensive activities during the transition to net zero emissions.
“The industry came together to agree our climate change roadmap which sets out what further action needs to be taken and includes a commitment to reducing carbon emissions across investment and underwriting portfolios by 50 per cent by 2030,” said an ABI spokesperson.
“Whilst the insurance industry will continue to innovate to provide new forms of insurance cover for new technologies and renewable energy sources, insurance may still be needed to ensure responsible cover is in place not least for the protection of employees or local residents through public or employers’ liability insurance.
“Ultimately, this is an issue which can only be tackled jointly between networks of local and national policymakers and civil society which is why our industry is also committed to working collaboratively to achieve the scale of change that is needed.”
Cover image thanks to iStock/Hramovnick.
