https://www.canadianunderwriter.ca/climate-change/growing-cost-of-climate-change-prompts-this-insurer-to-stop-covering-oil-sands-1004172252/
‘Growing cost’ of climate change prompts this insurer to stop covering
oil sands
January 2, 2020 by Greg Meckbach
The Hartford has added its name to the list of insurers who will not
write new business in Canada’s oil sands.
Connecticut-based Hartford Financial Services Group Inc. announced Dec.
20 it will stop insuring companies that generate more than 25% of
revenues directly from extracting of oil from the oil sands, though it
is making an exception for life and health. It is not clear whether The
Hartford actually has existing business in Canada’s oil sands that will
not be renewed.
Contacted Thursday by Canadian Underwriter, a spokesperson for The
Hartford said no one would be available for a phone interview. Asked by
email whether there are existing policies in the Canadian oil sands that
would not be renewed, the Hartford spokesperson’s reply repeated what
was stated in a company press release:
“We will phase out existing underwriting relationships and divest
publicly traded investments which exceed the [25% of revenues] threshold
by 2023. There are exceptions for business lines that cover employees,
such as disability, life and other voluntary products offered by our
Group Benefits division – where we are providing protection to people.”
It is unknown if the Dec. 20 announcement affects any insurance
applications in process. Asked whether are there existing applications
for new business that will be turned down, the spokesperson replied:
“The policy is effective immediately.”
Canada’s oil sands account for about a tenth of 1% of global greenhouse
gas emissions, Natural Resources Canada reports.
In addition to announcing its position on the oil sands, The Hartford
also said Dec. 20 that it will no longer insure or invest in companies
that generate more than 25% of their revenues from thermal coal mining
or more than 25% of their energy production from coal.
In Canada, Hartford Fire Insurance Company ranked 86th in the overall
P&C market, with 0.03% market share and $15.6 million in net premiums
written in in 2018, according to the 2019 Canadian Underwriter
Statistical Guide. Globally, Hartford had earned premiums of about US$7
billion in commercial P&C in 2018, the firm said this past February in
its 2018 annual report.
The Hartford is not the first carrier to publicly say it would not cover
certain oil sands risks.
Axis Capital Holdings Ltd. announced this past fall that it would stop
writing new insurance and facultative reinsurance for oil sands
extraction and pipeline projects, effective Jan. 1. The thinking behind
Bermuda-based Axis Capital’s move is to help mitigate climate risk and
transition to a low-carbon economy, Axis CEO Albert Benmichol said earlier.
A larger carrier , Munich Re, will apparently stop underwriting both
primary insurance and facultative reinsurance for the construction of
new oil sand sites. That announcement was made in a memo obtained
earlier by Canadian Underwriter, though Munich Re has neither confirmed
nor denied the authenticity of the document. The memo purportedly
applies to oil sands sites and their infrastructure but not to the oil
produced at those sites.
Munich Re was among the insurers that got a letter this past August from
dozens of advocacy groups who urged carriers to stop underwriting the
Trans Mountain pipeline, which is about to undergo a major expansion.
The existing pipeline, built in the 1950s, transports petroleum from
Edmonton to a tanker terminal near Vancouver. A project to twin the
pipeline – and triple its capacity – was recently approved by the
federal government, which recently bought the pipeline.
One of the groups that sent letters to Trans Mountain’s insurers is
Stand.earth.
“We have seen a lot of insurance companies, over the last four or five
years, adopt coal policies and get out of insuring coal mines,” Sven
Biggs, Vancouver-based climate and energy campaigner for Stand.earth,
told Canadian Underwriter earlier. “Tar sands is kind of the next front
in that.”
A Hartford spokesperson told Canadian Underwriter Thursday that its new
policy is not a response to last summer’s letter to the Trans Mountain
insurers.
“We have been working on our position throughout 2019, which was fully
vetted with our business leaders, investment professionals and the
board,” the spokesperson wrote. “Having completed that analysis, we are
now in a position to articulate our new policy.”
“The world needs affordable, accessible energy to support global
economic progress and, at the same time, action is needed to mitigate
the impact such activity has on our climate,” The Hartford chairman and
CEO Christopher Swift stated in the Dec. 20 release. “Extreme weather
affects people’s lives and businesses – and the risks are getting worse.
As an insurer and asset manager, we recognize the growing cost of this
crisis, and we’re determined to use our resources and influence to
address the challenge.”
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