Zurich, AXIS pull coverage for controversial oil and gas projects
The announcements come a few weeks after U.S. lawmakers pressed insurance executives not to insure oil and gas developments in the Arctic.
Both Zurich Insurance Group and AXIS Captial recently announced their intentions to cease insurance coverage for controversial oil and gas projects as the insurance industry continues on a rapid trend towards climate-friendly policies.
In a letter to the Gwich’in Steering Committee, AXIS declared that it would not provide coverage or investment support for projects related to exploration, drilling, or oil or gas production in the Arctic National Wildlife Refuge, becoming the first North American insurer to make such a commitment. AXIS also became the first U.S. insurer to restrict coverage for coal and tar sands projects in Oct. 2019.
According to Bloomberg, Zurich will stop providing insurance services to the Nord Stream 2 (NS2) gas pipeline, which would transport natural gas from Russia to Germany. The Swiss insurer is the third insurance company to cut ties with the NS2. Most recently, the European Parliament demanded construction to stop on the NS2 on Jan. 21 in response to Russia arresting Kremlin critic Alexei Navalny. The NS2 also faced U.S. sanctions in 2019, with further sanctions expected with the new Biden administration.
Insurers feel the pressure
Insurers are increasingly recognizing the financial and reputational risks of underwriting fossil fuel projects. According to The Sunrise Project, a total of 26 global insurance companies have ended or limited coverage for coal projects, with many also moving to restrict services in the oil and gas sectors.
AXA XL and Swiss Re pledged not to support projects contributing to Arctic Refuge destruction last year. In July 2020, German insurer Talanx dropped its coverage of Canada’s controversial Trans Mountain pipeline, which has a history of causing major environmental and public health hazards.
Lawmakers in the U.S. also have noticed the role insurance plays in fueling the climate crisis. Senators Dianne Feinstein (D-Calif.), Jeff Merkley (D-Ore.), Patrick Leahy (D-Vt.), Martin Heinrich (D-N.M.), Cory Booker (D-N.J.), and Chris Van Hollen (D-Md.) penned a letter in Dec. 2020 asking executives at 22 financial services companies not to insure oil and gas developments in the Arctic National Wildlife Refuge. Leaders at AIG, Allianz, Chubb, Lloyd’s, Munich Re, QBE, and Travelers were amongst those who received the senators’ message.
“The Arctic is on the frontline of the climate crisis, warming at three times the rate of the rest of the world. Fossil fuel extraction in these areas risks exacerbating climate chaos and irreparably damaging the local environment,” the lawmakers wrote. “The environmental, social, and governance factors linked with these developments will likely expose your company to unnecessary reputation, legal, and financial risk.”
Soon after dispatching the letter, Sen. Feinstein introduced the “Addressing Climate Financial Risk Act,” a bill that would help federal regulators mitigate climate change risks within the financial system. In a press release, Feinstein noted how the insurance industry is more affected by climate risk than other financial services in the U.S.
Related: