Bermuda

Revealed: The Bermuda-based firm crucial to new North Sea oil

Bermuda

A company set up by the fossil fuel industry and based in Bermuda is providing vital insurance coverage to firms behind two of the biggest and most controversial new oil fields in the North Sea.

An investigation by The Ferret found that the insurance firm, Everen, is providing coverage to three companies planning to drill for oil at the Rosebank and Cambo fields off the coast of Shetland. 

Both projects have been opposed by Scottish environmental groups who argued that, if approved by Westminster, they would be “climate wrecking” and significantly hamper the UK’s ability to meet its emissions reduction targets

Finding a company to insure a new oil and gas field against environmental risks such as oil spills is an important part of getting a new project off the ground. Without coverage, would-be drillers are unable to get the permits needed to produce new oil. 

Commercial insurers are increasingly distancing themselves from new oil and gas projects as they try to meet their climate targets. To date, ten global insurers have committed to ending or restricting coverage of new oil and gas fields. 

But while many major insurers begin to take a harder line on oil and gas, Everen will underwrite new energy projects regardless of which “end of the energy spectrum” they come from. The company — a mutual insurer — was initially set up by fossil fuel giants to serve the needs of the global oil industry. 

Experts on climate finance have warned that Everen could undermine efforts by commercial insurers to break their ties to fossil fuels and “slow down” the transition to clean energy. 

Companies like Everen could slow down the real impacts of the adoption of fossil fuel policies by large traditional insurers

Ariel Le bourdonnec, Reclaim Finance

They claimed that Everen and other mutual insurers reduce “transparency and accountability” and could enable oil and gas projects such as Cambo and Rosebank to go ahead where they may “otherwise have been shunned by traditional insurers”. 

Everen did not respond to a request for comment by The Ferret. But a body that represents the North Sea industry said that stopping new oil projects would cause job losses and make the UK reliant on “costly energy imports” from abroad.

Known as Oil Insurance Limited until this year, Everen was established in Bermuda by 16 oil companies in 1972 after two major spills in the US revealed problems with the way oil projects were insured. 

The companies that hold policies with Everen are also members and shareholders in the firm. Membership is reserved for some of the biggest energy companies in the world.

Members pay premiums to Everen which cover them, and other members, against the costs that would arise from a major environmental incident.

They can access insurance coverage worth up to $450m (£407m) for a single incident, more than the $250m (£226m) required to get a licence to produce oil and gas in the UK. This serves as “cornerstone capacity” for members’ global insurance programmes.

Bermuda
Often described as a tax haven, Bermuda does not charge corporation tax. Image credit: lietz.photo

Everen’s board of directors is made up almost entirely of staff from energy companies, including oil majors such as Chevron, ConocoPhillips and TotalEnergies.

As well as providing insurance coverage, Everen also provides its members with financial incentives. 

Bermuda is an attractive location for global insurance players because it does not charge corporation tax. This means that years without large insurance payouts can be profitable. Last year, Everen paid a dividend of $350m (£316.5m) to its members. 

While the insurance market becomes harder for oil and gas companies to access, Everen — which describes itself as the “most important insurer of energy operations in the world” — is growing.

Everen’s membership has increased by 20 per cent since 2018 and the company now provides coverage to 64 energy companies and over $3tn (£2.71tn) worth of assets worldwide.

The firm is committed to the oil and gas sector. Its five-year plan notes that Everen will need to “embrace new technologies while continuing to insure traditional oil and gas operations”. 

This is despite a study from the International Energy Agency finding last year that no new fossil fuel projects can go ahead if the world is to limit climate change to safe levels.

According to Ariel Le bourdonnec, an insurance analyst at Reclaim Finance, companies such as  Everen are “a problem” because they allow oil companies to shift away from “climate conscious” insurers.

“Companies like Everen could slow down the real impacts of the adoption of fossil fuel policies by large traditional insurers,” Le bourdonnec told The Ferret. 

“However, they could not be a substitute for the massive insurance capacity of traditional insurers. It is therefore a problem with the pace of transition to green technologies, which we need to accelerate, not slow down.”

Equinor and Suncor Energy, two of the firms which own stakes in the Rosebank oil field north west of Shetland, are both listed as members of Everen. 

Rosebank is the biggest undeveloped oil field in the North Sea. The field — which is located 80 miles north west of Shetland — could produce 168m tonnes of climate emissions throughout its lifetime. This is more than four times the amount of pollution produced in Scotland in a single year. 

By reducing transparency and accountability, mutual insurance could enable oil and gas projects to proceed in cases where they would otherwise have been shunned by traditional insurance companies

Arjun Flora, Institute for Energy Economics and Financial Analysis

Equinor submitted an environmental statement for Rosebank to the UK Government earlier in 2022. If the field is approved, it could be producing oil by the end of 2026. 

Delek Group, the Israeli firm which owns Ithaca Energy, is also a member of Everen. 

Ithaca now has a controlling stake in Cambo field, which faced opposition from environmental activists in 2021. Ithaca also has a stake in Rosebank. 

Lisa Rose, a Bermudian climate activist at the campaign group 350.org, said that the firms were using “their own mutual insurance company, Everen, as a last resort to push ahead with their unpopular plans”. 

Rose added: “Everen enjoys a positive local reputation by sponsoring worthy community projects on the island. Perhaps if more Bermudians realised that they are also sponsoring the continued expansion of the fossil fuel industry and the destruction of our ecosystems that support all life on Earth — they would find it harder to exist.”

Arjun Flora, a partner at the Institute for Energy Economics and Financial Analysis, argued that mutual insurers like Everen are threatening to “prolong our dependence on fossil fuels”

Flora said: “By reducing transparency and accountability, mutual insurance could enable oil and gas projects to proceed in cases where they would otherwise have been shunned by traditional insurance companies.

“They could also cause an unhealthy concentration of risk, or inadequate insurance coverage, which could mean that governments and taxpayers have to step in to cover costs in the event of a disaster.

A spokesperson for Offshore Energies UK, the trade body which represents the North Sea oil and gas sector, said: “The UK offshore oil and gas industry is changing and applying low carbon thinking to all its projects to support the transition to greener, cleaner energy. 

“Stopping North Sea oil and gas production would just lead to job losses and costly energy imports that may not meet the UK’s ambitions for greenhouse gas emission reductions, while imposing huge long-term costs on UK consumers and businesses. 

“Bringing projects to the development stage is a lengthy process involving rigorous assessment of all aspects, including environmental management, safety, decommissioning responsibilities and extensive engagement with all stakeholders to take account of societal concerns.”

Equinor and Ithaca Energy declined to comment, while Suncor did not reply to an enquiry from The Ferret.

The Ferret has received funding from the Sunrise Project to investigate the insurance industry’s involvement in the North Sea oil and gas industry and retains complete editorial control.

Cover image thanks to Ben Wicks

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