On May 27th, 2022, SOMPO, one of the leading property & casualty insurers in Japan with MS&AD and Tokio Marine, revealed its first exclusion measures on unconventional oil & gas and updated its coal policy. While SOMPO still allows for unjustifiable exceptions for new and existing coal projects, it also falls short of catching up with best practices set by European insurers and only reduces its coverage to tar sands and exploration projects in a minimal part of the Arctic. SOMPO must urgently go back to the drawing board and commit to stay away from all new fossil projects in line with recent conclusions from the International Energy Agency (IEA) NZE and One Earth Climate Model (OECM) Decarbonization Pathway.
Key points in the policy
SOMPO will not insure and invest in new and existing coal mines. Yet, as for its exclusion of new and existing coal plants taken in 2021, SOMPO allows exceptions for new mines using abatement technologies such as carbon dioxide capture, utilization and storage technology (CCS, CCUS), and ammonia co-firing.
SOMPO will refuse to insure and invest in new and existing tar sands projects. It will also stop insuring oil & gas exploration projects in the Arctic National Wildlife Refuge.
Our analysis:
THE POSITIVES
- By now excluding both new and existing coal plants and mines from its insurance businesses, SOMPO goes beyond other Asian insurers and is close to align with best practices set by other international insurers.
- SOMPO became the first Asian insurer to restrict its coverage to the oil and gas sector, tackling as many other European and US insurers unconventional sectors first. Sompo joins a group of 14 global insurers to stop their insurance coverage for tar sands projects. At least 11 insurers exclude from their underwriting business oil and gas exploration projects located in the Arctic and SOMPO becomes the 3rd to take measures to exclude oil & gas activities in the Arctic National Wildlife Refuge (ANWR) after Mapfre and Axis Capital.
- SOMPO strengthens its policy on coal projects but it still makes room for exceptions, allowing coverage for projects with abatement technologies even though the One Earth Climate Model Decarbonization Model report, commissioned by the United Nations and the Net Zero Asset Owner Alliance, clearly stated that Bioenergy with Carbon Capture and Storage (BECCS) and Carbon Capture, Utilization and Storage (CCUS) lack commercial viability and we will have 100% of electricity generation from renewables in the no overshoot 1.5C scenario leaving no room for future coal projects.
- SOMPO’s new exclusion on new and existing tar sands projects is far from enough to deal a blow to the oil & gas expansion. According to the GOGEL, only 1,5% of oil & gas expansion would come from oil sands and the Arctic National Wildlife Refuge accounts for a very minimal part of the Arctic.
- SOMPO’s exclusion on Arctic exploration projects is inefficient to protect the Arctic’s ecosystem: it only concerns the Arctic National Wildlife Refuge, a very little share of the total Arctic zone defined by the Arctic Monitoring And Assessment Programme, and used by many insurers.
- While the whole energy system needs to be decarbonized, SOMPO only focuses on two categories of upstream unconventional oil & gas projects. SOMPO should also add new midstream projects (e.g oil and gas pipeline projects or LNG terminals) and downstream projects (e.g gas-fired or oil-fired power plant) to its underwriting exclusion lists. These projects are stumbling blocks on the international effort to limit global warming at 1.5°C as they contribute to the opening of new oil & gas fields, and could lock in greenhouse gas emissions for decades.
- For both coal and oil & gas, SOMPO fails going beyond exclusion at project level. Not only will it keep covering the risks of all companies operating in the coal, oil and gas sectors, it could insure companies planning to develop new coal, tar sands or Arctic projects.
We welcome the new SOMPO’s policy that sets the best standards to stop the underwriting of coal and new oil & gas projects among Japanese insurers. We call on its other competitors such as MS&AD and Tokio Marine to follow SOMPO’s suit. However, SOMPO still allows for unjustifiable exceptions for new coal projects and its oil & gas policy only focuses on a small share of the problem. As a manager of risks, SOMPO must shoulder its responsibilities and should rapidly commit to fully exit the coal sector and add all new oil & gas production projects to its underwriting exclusions.