‘Growing cost’ of climate change prompts this insurer to stop covering oil sands

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.”