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Insurance companies distance from EACOP

Insurance companies distance from EACOP

Insurance industry exodus adds new struggles to EACOP project amidst environmental and economic concerns (Courtesy photo)

In a significant setback for the East African Crude Oil Pipeline (EACOP), numerous insurance companies have distanced themselves from the project, intensifying the challenges that have plagued its construction for four years. This development follows sustained pressure from climate activists who argue that the EACOP poses substantial risks to both the environment and human rights.

A total of 28 insurers have now publicly declared their refusal to insure the EACOP, citing concerns raised by environmental organizations such as Coal Action Network, Insure Our Future, and StopEACOP. Notable insurance companies, including SiriusPoint, Riverstone International, Enstar Group, Blenheim, and SA Meacock, have issued clear statements disassociating themselves from the transboundary project.

Riverstone International explicitly stated that it neither directly nor indirectly underwrites the EACOP project and has no intentions to do so. SiriusPoint clarified that it is not participating in the EACOP tender, while Enstar, Blenheim, and SA Meacock echoed similar sentiments.

The decisions come after months of targeted efforts by environmental organizations to hold insurance firms accountable for their involvement in projects deemed harmful to local communities and ecosystems. Notably, AIG, Tokio Marine, Chaucer, and Hiscox remain willing to insure the project, but the pressure is expected to grow on them to reconsider their involvement.

With 350.org, a global grassroots climate change movement, emphasizing the crucial moment for decision-making, the fate of the EACOP hangs in the balance. Local insurers are unable to cover more than 30 percent of the required insurance for the project, placing it in a precarious position.

Experts suggest that the Ugandan government, burdened by a debt of over $25 billion, may lower its standards and offer attractive terms to attract investors. Dickens Kamugisha, executive director of the Africa Institute for Energy Governance, warns of the government’s desperation, highlighting the potential impact on the project’s integrity.

The 1,443-kilometer pipeline, majority-owned by French oil giant TotalEnergies and state oil companies of China, Uganda, and Tanzania, faces criticism for its planned route through ecologically sensitive areas, including national parks and wildlife reserves.

Apart from environmental concerns, the economic viability of the EACOP is also in question, given its reliance on volatile international oil prices. With the global shift towards renewable energy, there is a genuine risk that demand for crude oil could decline, rendering the EACOP economically unfeasible.

While Western banks have shown reluctance, Chinese lenders, promising $3.5 billion, are yet to make a final decision, potentially leading to further delays. The EACOP project’s challenges underscore the need for the insurance and banking industries to align with the global transition away from fossil fuels, as recognized during COP28 in Dubai.

As nations acknowledge the imperative of transitioning to clean energy solutions, environmentalists stress the responsibility of financial institutions to avoid involvement in fossil fuel projects. Dickens Kamugisha emphasizes the importance of investing in cleaner energy that benefits citizens, challenging the conventional claim that oil projects in Africa bring widespread benefits.

While Angela Ambaho, head of corporate affairs at the Uganda National Oil Company, asserts that the project is progressing, concerns persist over its viability in the face of evolving global energy dynamics. The EACOP, which initiated above-ground installations in Tanzania and Uganda in November last year, aims for project completion by December 2025.

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