Homeowners lose cover for climate risks while insurance industry keeps backing increased oil and gas production

Industry must act to support 1.5°C climate target after 50 years of failure

9 November, Kinshasa – Fifty years after the insurance industry first warned about the impact of climate change, it is continuing to fuel the climate emergency. This is the key warning by the Insure Our Future campaign  in its seventh annual scorecard on insurers’ climate policies which was published today. The findings show that Insurers are abandoning customers affected by climate risks, yet most continue to fuel the climate emergency by providing cover for increased oil and gas production. 

The continent of Africa and the broader Global South are disproportionately impacted by the climate crisis. Last October, Nigeria reported almost 800,000 displaced and 500 dead from floods, while Pakistan is still dealing with the aftermath of devastating floods that drowned a third of the country. In Somalia one million people were displaced due to a drought following a historic two-year dry spell. 

The growing frequency and severity of these climate-related disasters has seen insurance payouts for natural catastrophes soar to an average $110 billion a year since 2017, more than twice the average over the previous five years. Insurers are now declining to insure homeowners in markets at greatest risk. Despite this, the latest report reveals that most insurers continue to support projects to increase oil and gas production, even though the world’s leading climate scientists at the Intergovernmental Panel on Climate Change and experts at the International Energy Agency agree that this is incompatible with the 1.5°C Paris climate target. 

Fossil fuel insurance earned the industry around $21.25 billion in 2022, according to research commissioned for the report. Insurers on the Lloyds of London market collectively are the world’s biggest fossil fuel underwriters with an estimated $1.6-$2.2 billion in annual premiums. The top ten individual insurers include AEGIS, Chubb, Allianz, AXA, Fairfax Financial, Zurich, W. R. Berkley and AIG.

Peter Bosshard, Global Coordinator of the Insure Our Future campaign, said: “The insurance industry first warned about climate risks in 1973, and these have now become a grim reality, particularly for low-income countries and communities which have contributed least to the climate emergency. Insurance companies are now abandoning customers affected by climate risks, yet they continue to fuel the climate crisis by underwriting and investing in the expansion of fossil fuels.

“If insurance companies took climate science seriously, they would fully align their underwriting and investment strategies with a credible 1.5°C pathway and end all support for increased fossil fuel production. They would be suing fossil fuel companies, to make polluters pay for the growing costs of climate disasters and keep insurance affordable for climate-affected communities.”

Top 10 fossil fuel insurers in 2022 (in million $) – Insuramore estimates

Fossil fuels insurance in Africa

In the past three years, the Stop EACOP coalition took on the insurance industry to stop the development of the East Africa Crude Oil pipeline. 

One of the latest and riskiest investments seen on the African continent on offer today is in the Democratic Republic of Congo (DRC). In July of 2022, it auctioned the exploration rights for 30 oil and gas blocks in an area of about 277,000 sq km (106,950 sq miles) – larger than the size of the United Kingdom or Ghana. 13 of these oil blocks straddle protected areas and national parks, including the UNESCO World Heritage-listed Virunga National Park, contrary to the promises of the DRC’s Minister of Hydrocarbons, Didier Budimbu.

The DRC does not have the national capacity to provide insurance for oil and exploration and the high risk it entails, therefore, companies winning exploration rights in DRC oil block tenders will most likely rely on the services of some of the world’s largest insurance and reinsurance companies, mainly located around Europe and North America. 

In September, Greenpeace activists demonstrated at the Rendez-Vous de Septembre (RVS) in Monte Carlo (Monaco), demanding that insurance and reinsurance companies refrain from covering the risk of the development of oil concessions in a carbon bomb and biodiversity hotspot in the Congo rainforest. The RVS is the largest gathering in the sector and enables all players in the insurance and reinsurance market to meet up and hold bilateral discussions ahead of the renewals.

Following the Congo Oil Fields report published by Greenpeace Africa, Insure Our Future and other partners in September, analysing the specific commitments of insurance and reinsurance companies concerning the oil auction in the DRC, activists came to Monte Carlo to dissuade companies from underwriting oil development in the rainforest.

Irene Wabiwa, Congo basin forest international lead at Greenpeace Africa, said: “While some companies have risen to the challenge by giving us a commitment to not provide insurance for the disastrous oil auctions in the DRC, many are still silent and carry on business as usual. Let’s be clear: business as usual in the insurance industry spells a bad deal for the planet.” 

“We have collected evidence showing that oil tenders in the DRC do not respect the Free, Prior and Informed Consent of indigenous peoples and local communities inhabiting the areas for which exploration rights are being auctioned. When our forest campaigners visited eight of the oil blocks, local communities were shocked by the prospect of their land being auctioned off to these oil companies. Insuring fossil fuel companies without the consent of indigenous peoples and local communities, especially in the midst of a climate crisis, is simply out of the question and so we demand insurance companies to stop lagging behind at the expense of African lives.”

Restrictions on oil and gas far weaker than on coal

The 2023 Scorecard on Insurance, Fossil Fuels and the Climate Emergency, scores and ranks the climate policies of 30 major insurers and is published by 22 organisations from 12 countries. Additionally, Insurers have now introduced restrictions on coal that are making a real impact, and new coal power plants have become all but uninsurable, however oil and gas restrictions are far more limited and allow continued support for new LNG terminals, gas plants and expansion of oil and gas production. 

Growing pressure to align with 1.5°C

In the scorecard, Insure Our Future calls on the International Association of Insurance Supervisors, currently holding its annual meeting in Tokyo (November 9-10) to create a process for regulating the alignment of insurance underwriting with climate science, including a mandatory requirement for science-based transition plans.

“A scorched, uninsurable world is a world without an insurance industry and so insurance companies have an eminent self-interest in scaling up their climate action. Insurers have demonstrated that they can accelerate the shift away from fossil fuels through their coal exit policies. They urgently need to adopt similar policies on oil and gas,” says the scorecard. 

ENDS

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