Extinction Rebellion: insurance claims denied

I suppose I should be surprised that Extinction Rebellion (“ER”) have picketed Lloyd’s of London demanding “an end to all new fossil fuel investments and insurance”. Lloyd’s is hardly the most obvious target to those who appreciate and understand the historic role of insurance in the innovation and development of improvements in our risk environment. However, its iconic building is a prominent target for protesters without such understanding.

Many of the risk identification, control and mitigation measures we take for granted were originated by the insurance industry, taking on the financing of the risks of others and taking seriously the responsibility to improve their risk landscape where possible. As an example, many of the first fire services were those of insurance companies. To suggest that the insurance industry sustains risk is to misunderstand its purpose and misrepresent its history.

As regards the role of insurers in oil production, this clearly is not well understood by Extinction Rebellion. Most oil is produced by companies operating at scale, in difficult operating environments, with large scale machinery, and delivering a highly volatile and toxic product. The sheer scale of the exposures involved are many times the amount of insurance capacity available from the insurance markets for their protection, even if the entire capacity of the global energy insurance market were available. This is why oil companies have to be huge (or government supported) as they must be able to bear the vast majority of these risks themselves on their own balance sheets. It is, indeed, public knowledge that some of the largest oil companies have a policy of not buying insurance (other than that required by regulation or statute) in the commercial market for this reason, using their own in house (“captive”) insurance companies as vehicles for the financing and governance of their risk.

Accordingly looking to attack oil production via the wholesale insurance market would seem to be somewhat misguided and may actually impede climate change goals.

Finally, the ER spokesperson spoke of insurance “locking us into a system that’s already pushing millions into poverty”. This statement hardly stands up to any reasonable scrutiny bearing in mind the substantial role of insurance in the alleviation of many sources of hardship and poverty. I refer here to the massive role of insurance in rebuilding shattered communities and lives in the aftermath of major catastrophes, in the protection of people’s livelihoods when companies are hit by unexpected events, and the protection people enjoy in their lives as a result of access to their own insurance safeguarding themselves and their possessions, and in the protection afforded by the provision of casualty insurance when adverse events cause them damage or loss. Rather than sustaining poverty, insurance continues to play a huge role in its mitigation, alleviation, and remediation.

Far from attacking international insurance as the cause of oil dependency and climate change, Extinction Rebellion should recognise and encourage its role as a catalyst and enabler of change.