Limited access to insurance is emerging as a big obstacle for Canadian tar sands/oil sands companies aiming to get new projects off the ground, just a year or two after campaigners began setting their sights on getting insurers to abandon fossil fuels, CBC reports.
The new vulnerability for fossil producers came into focus earlier this year when federally-owned Trans Mountain Corporation made a successful pitch to keep the identities of its insurers secret, for fear that climate, energy, and Indigenous rights campaigners would target them to refuse coverage. But the industry’s problem extends far beyond one controversial and contested pipeline expansion.
As far back as 2017, French multinational insurer Axa S.A. was warning that climate regulations and public pressure “could result in significant loss of value (‘stranded assets’) for the most carbon-intensive businesses,” in a note that called the tar sands/oil sands “a particularly carbon-intensive form of energy,” CBC writes. Now, citing industry veteran Joe Seeger, the national broadcaster says the number of big insurers willing to consider tar sands/oil sands projects is down from about 50 to about 25.
“When big players likes Axa, Allianz, and Zurich announce they are reducing their exposure to emission-intensive sectors such as the oilsands, amid ‘an increasing climate crisis,’ they can pull out hundreds of millions of dollars of insurance coverage,” CBC says.
“It really is a supply and demand situation, where we always go to our clients and have the bad news of [explaining] there are fewer insurers, and we have to try to figure out new ways to do the business,” Seeger said. As a result, “based on the coverages that you can get, I don’t know if you’d see any more of these megaprojects go on in the oilsands anymore. I just don’t see the ability to financially backstop some of the megaprojects that put the oilsands on the map.”
Colossal fossils like ExxonMobil and Royal Dutch Shell, as well as big Canadian producers like Suncor Energy, can get around the problem by self-insuring, CBC explains. “But smaller companies don’t have the same luxury,” even though “adequate insurance for a large industrial facility is often required by banks and other investors.”
Ironically enough for an industry that touts itself as an “ethical” alternative to oil from other parts of the world, CBC says the Alberta industry is now turning to insurers in China and Saudi Arabia in its quest for coverage.
Rainforest Action Network climate justice campaigner Elana Sulakshana told CBC the focus on fossils’ insurance providers “is not a silver bullet,” since many companies can self-insure and the majority of the world’s oil and gas production comes from state-owned enterprises. “The climate movement has a lot of work to do to grapple with how we’re challenging the buildout of oil and gas infrastructure in some of those petro-nations like Saudi Arabia and Russia,” she said.
At the same time, Trans Mountain’s successful plea to the Canada Energy Regulator to suppress the names of its insurers “is certainly a sign that the pressure on the insurance companies is working.”
CBC has video of an interview with Elana Sulakshana.