3 reasons why insurance companies should drop the Trans Mountain pipeline
May 26, 2021
1. Climate change is hurting the bottom line of the insurance industry.
The Insurance Institute of Canada’s 2020 report Climate Risks Implications for the Insurance Industry in Canada found that:
“Since the 1980s, the payouts for severe weather damage claims have doubled every 5 to 10 years. If the trend continues it will drive a profound, transformative change in Canada’s insurance industry…the average annual severe weather claims paid by insurers in Canada is expected to double over the next 10 years, increasing from $2.1 billion a year to $5 billion.”
If ambitious action on climate change is not taken, its impact on the insurance industry will continue to grow. There is, additionally, a growing expectation that companies demonstrate their environmental and social responsibility in order to maintain social license. In light of these new public expectations, many insurance companies are reconsidering their business connections through the lens of climate change and choosing to cut ties with companies and projects that increase the extraction of the most carbon intensive fossil fuels.
In recent years, there has been a sector-wide shift away from climate polluting fossil fuel projects. This is especially true for most expensive, energy intensive and risky projects like Arctic oil and tar sands. To date, 19 major insurance and reinsurance companies worldwide have adopted climate policies that limit or end all insurance coverage for coal and/or tar sands projects, including three companies that insured Trans Mountain as of 2020. In addition, over 20 major banks, including BNP and ING, have adopted tar sands finance restrictions due to the climate impacts of the sector.
2. Tar sands is some of the dirtiest oil on the planet.
A recent report from the Pembina Institute found that climate emissions from a barrel of tar sands 70% above the global average, confirming that the tar sands are one of the dirtiest, highest carbon sources of oil on the planet. Emissions from oil and gas production are one of the primary reasons Canada cannot meet its Paris commitments. These emissions now represent the largest and fastest growing source of emissions in Canada.
One of the key factors containing the growth of the tar sands and the associated climate emissions is a lack of pipeline capacity. This is why the fate of the Trans Mountain Pipeline Expansion – which would ship 590,000 barrels per day of tar sands crude – is critical to the fight to limit the impacts of climate change.
If this pipeline goes into operation, climate scientists estimate that upstream emissions in Alberta will go up by 21 – 27 Mt Co2e a year and downstream emissions from refining and burning the oil will add a further 71.1 Mt Co2e annually. This is why Dr. Mark Jaccard, who is an IPCC lead author and the author of the latter study concluded “oil sands expansion is inconsistent with preventing warming greater than 2°C” which is the minimum threshold to maintain a safe climate.
3. This pipeline is trampling on the rights and title of Indigenous People.
The pipeline has not obtained the Free, Prior, and Informed Consent of impacted Indigenous communities and is currently the subject of active litigation, and widespread public opposition. The project has been successfully delayed by Indigenous-led frontline and legal resistance, which will continue.
Given the grave climate and human rights risks associated with Trans Mountain’s activities, three major insurers (lead insurer Zurich, Talanx, and Munich Re) cut ties with the Trans Mountain tar sands pipeline in June and July 2020. Nearly ten insurers – through specific comments or broad oil sands exit policies – have ruled out insuring Trans Mountain’s destructive pipelines.
We urge other insurance companies to join these industry leaders and cut ties with this risky project.