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Lloyd’s undermines climate targets with $460 million of support for tar sands pipeline

European insurers Lloyd’s, Zurich and Munich Re are the biggest supporters of Canada’s Trans Mountain pipeline, enabling a huge expansion of tar sands oil that would undermine international climate targets, the Unfriend Coal campaign reveals today.

Trans Mountain is pressing ahead with plans to expand its pipeline connecting tar sands in Alberta to the Pacific coast outside Vancouver, adding an extra 590,000 barrels a day of capacity – the equivalent of putting 2.2 million cars on the road. It would increase daily flow to nearly 1 million barrels.

However, Canadian tar sands are one of the highest-carbon sources of oil on the planet. No new tar sands projects are consistent with the Paris climate targets and high production costs mean that any new investments risk becoming stranded assets, finds a recent report by the financial think tank Carbon Tracker.

Trans Mountain’s Certificate of Insurance was filed with the Canada Energy Regulator on April 24th, just ahead of the April 30th deadline. It details the providers of $508 million of liability insurance cover for the 12 months to August 31, 2020, and shows that its biggest backers are European insurers.

  • Insurers in the Lloyd’s market have underwritten $460 million. They are solely responsible for $50 million of cover and have underwritten the rest jointly with other insurers.
  • Zurich has increased its support significantly, despite adopting a policy against insuring tar sands infrastructure last year. It is solely responsible for $8 million of cover but since last year has doubled the cover it provides jointly with other insurers to $300 million.
  • Munich Re developed a policy on tar sands insurance last year but its Canadian subsidiary Temple Insurance remains Trans Mountain’s third biggest insurer providing $250 million of cover with other insurers.
  • Chubb’s European operations have also increased their support significantly since last year when Chubb Europe provided $15 million of cover. As well as renewing this Chubb European Group is also underwriting $185 million with other insurers.

In June 2019 Zurich became the first insurer to sign the Business Ambition for 1.5°C Pledge and announced a package of measures to restrict support to the most carbon-intense fossil fuels including an end to underwriting operators of oil sands pipelines. However, it said that it would engage with clients over a two-year period with the aim of driving plans to “reduce their exposure to thermal coal, oil sands and oil shales.”

Seven other insurers are listed on the Certificate of Insurance: Liberty Mutual, Energy Insurance Mutual; AIG Insurance Co. of Canada; Stewart Specialty Risk Underwriting; WR Berkley, HDI Global SE of Canada (a subsidiary of Talanx) and Starr. The document is signed on behalf of JLT, an insurance broker acquired by New York-based Marsh & McLennan Companies in April 2019.

The Canadian government purchased the existing Trans Mountain pipeline and expansion project from Kinder Morgan for C$4.5 billion in 2018 after the company struggled to finance the expansion. However, it has faced criticism for backing a project which is at odds with its Paris Agreement commitments.

The world’s leading climate scientists warned in a special report that even half a degree of warming beyond 1.5°C would significantly worsen the risks of drought, floods, extreme heat and poverty for hundreds of millions of people. Lead author Dr Kirsten Zickfeld said: “Our recent report shows very clearly that if we are going to ensure we stay below 1.5C of warming no further expansion of the oil industry or new oil infrastructure, such as the Trans Mountain pipeline, is possible.”

The Trans Mountain pipeline expansion also poses grave threats to Indigenous rights. The Treaty Alliance Against Tar Sands Expansion, comprised of more than 120 First Nations and Tribes, stands in opposition to all tar sands pipelines crossing their traditional lands and waters and has called for an international campaign targeting the financial backers of these projects.

To date, seven insurers have announced policies limiting insurance for tar sands operations: AXA, AXIS Capital, Generali, The Hartford, Munich Re, Swiss Re and Zurich.

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