Two global insurance giants have confirmed that they will not provide coverage to controversial new oil and gas fields in the North Sea.
The only firms who said they would not cover the projects on climate grounds were Aviva and the Italian firm, Generali. Both have committed to phasing out insurance of oil and gas production to “help drive the transition to a low-carbon, climate resilient economy”.
Climate campaigners welcomed the commitment by the companies because insurers “know better than many what fossil fuels are doing to our climate”. They added that by ruling out covering them, the companies had “acknowledged that allowing these new fields to proceed goes against climate science”.
The oil and gas industry said that it would be “wildly misguided” to stop insuring new fields, though. It argued that gas would be needed as a back up to renewable energy, while oil is a “key manufacturing component in green products like solar panels and wind turbines”.
Seven other insurers have introduced restrictions on their coverage of new oil and gas production since 2020. These companies either did not respond to our enquiry, said they do not comment on individual projects, or do not have significant operations in the UK market.
Two other firms – Spanish insurer, Mapfre, and German company, HDI – said they were not currently involved in the insurance of the fields. HDI said this was based more on business than climate considerations, while Mapfre declined to give more information.
The other companies contacted either did not respond or said they were not willing to comment on individual projects.
Insurance companies play an important part in the financial infrastructure which supports new oil and gas projects. Without insurance to cover companies against environmental risks, new oil and gas exploration cannot go ahead.
The oil and gas market is also lucrative for insurance companies. It is estimated that insurers receive £13.7bn each year in premiums from customers in the industry.
But contracts between fossil fuel firms and insurers are not made public, meaning it is very difficult to find out which companies are underwriting new projects.
There is growing pressure for financial institutions to drop their support for the fossil fuel industry.
Calls for divestment have grown louder since the International Energy Agency (IEA) warned in May 2021 that no new fossil fuel projects can go ahead if global warming is to be limited to no more than 1.5 degrees. This was the target of the 2015 Paris Agreement.
Recent years have seen a growing number of insurers excluding coverage of the most environmentally damaging fossil fuels. 38 global insurers have excluded or restricted underwriting of new coal mines, while a further 17 have adopted similar policies on tar sands projects.
Jackdaw, Cambo and Rosebank have provoked opposition from environmental groups because of their size, and the fact they are being progressed despite the IEA announcement.
Jackdaw’s owner, Shell, unveiled new plans for the field in March 2022 with a view to getting production up and running by 2025. The project was rejected on environmental grounds by the UK Government in October 2021.
Shell claims that the field will produce enough gas to heat 1.4 million British homes, and will help wean the UK off foreign gas imports.
Cambo – which was the subject of fierce opposition from campaigners in 2021 – was recently purchased by Ithaca Energy. The company has links to illegal Israeli settlements in the West Bank.
Ithaca has pledged to develop the field after it was put on hold by its previous owner, in the face of the protests, at the end of last year.
Rosebank – owned by the Norwegian state energy company, Equinor – is the largest undeveloped oil field in the North Sea. It has the potential to produce 168 million tonnes of carbon dioxide emissions throughout its lifetime, exacerbating the climate crisis.
Tessa Khan, director of the campaign group Uplift, said that insurers were “at last catching on” that “new oil and gas means more profit for the likes of Shell and BP, but greater risk for everyone else”.
Khan added: “The insurance industry knows better than many what fossil fuels are doing to our climate, so this is a welcome move by these companies. By specifically ruling out insuring new North Sea oil and gas projects like Cambo, Jackdaw and Rosebank, they are in agreement with climate scientists and campaigners.
“New domestic oil and gas production is a bad bet: it won’t lower people’s energy bills and won’t provide energy security, unlike accelerating the UK’s renewable capacity.”
When asked whether it would consider insuring Cambo, Jackdaw, or Rosebank, Aviva said it had been “very clear about its refusal to underwrite offshore oil and gas rigs and platforms”. Aviva’s underwriting strategy notes that the firm no longer offers insurance for “any new fossil fuel or mining extraction projects”.
Meanwhile, Generali told The Ferret it was “not insuring upstream oil and gas” globally.
UK market intelligence manager at the trade body Offshore Energies UK, Ross Dornan, said oil and gas companies are “accelerating” the UK’s journey to net-zero emissions.
Dornan said: “13 of the 17 recent Scotwind projects have traditional oil and gas companies behind them.
“Also we’ll continue to need gas when we cannot generate enough energy through wind, and North Sea oil is also a key manufacturing component in green products like solar panels, wind turbines, electric vehicles, as well as everyday items like clothes, medicines, laptops and smartphones.
“So, not only would it be wildly misguided to avoid insuring energy companies for vague climate motivations – it would actually harm investment into the green energies we need to the tackle climate crisis.”
Photo Credit: iStock/arild lilleboe
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.