The global oil and gas industry is increasingly grappling with financing hurdles as pressure mounts from politicians, advocacy groups, and insurers. While calls for divestment from fossil fuels intensify, demand for hydrocarbons remains strong. The International Energy Agency (IEA) continues to urge investments in energy.
In a surprising announcement, Generali, Italy’s largest insurer, declared it would stop providing new coverage for downstream operations, which include oil and gas transportation, processing, and distribution. However, coverage may still be available if companies meet specific energy transition requirements. Generali’s decision affects insurance policies for midstream and downstream sectors, such as liquefied natural gas (LNG) terminals, pipelines, and gas-fired power plants. The insurer stated that this move aligns with its long-term goals linked to the Paris Agreement, which seeks to limit global warming to below 2°C.
Generali referenced the Intergovernmental Panel on Climate Change (IPCC), which emphasizes the urgent need for decarbonization across all sectors. Key targets include halving global greenhouse gas emissions by 2030 and phasing out fossil fuels. Generali aims to transition its investment and insurance portfolios to achieve net-zero emissions by 2050. The company is already a member of the Net-Zero Asset Owner Alliance and the Forum for Insurance Transition to Net-Zero, and it supports the Task Force on Climate-related Financial Disclosures.
Environmental groups in Italy and Europe have reacted positively to Generali’s decision. However, many activists argue that the move is not enough and are urging other insurers to follow suit. Organizations like Insure Our Future call for the removal of insurance from LNG projects globally, targeting major insurers such as Allianz, AXA, and Chubb.
Generali’s shift primarily targets companies lagging in transition efforts, but it has already ceased insuring upstream projects. The question remains whether Generali’s actions will gain substantial support from major Italian firms, such as ENI, Edison, Enel, and oilfield service giants Saipem and SNAM. These companies significantly contribute to Italy’s GDP and are involved in major renewable energy initiatives, including offshore wind projects.
The approach taken by Generali could have mixed consequences. While cutting insurance for oil and gas operations, it could also affect energy transition projects. Insurance for downstream operations is often linked to offshore wind and green hydrogen initiatives.
Global environmental activist group Extinction Rebellion (XR) is intensifying its pressure on the insurance industry. In a recent letter to UK-based insurance companies, XR called for insurers to withdraw from hydrocarbon projects worldwide. The group plans to stage protests in London and across the UK next week, echoing demonstrations held in February. According to Steve Tooze, an XR spokesperson, the insurance industry “is choosing to bet on profits from underwriting oil, gas, and coal projects that are accelerating the climate crisis.”
Many anti-hydrocarbon investment groups cite reports from the IPCC and the IEA, which has been increasingly promoting green strategies. Despite this, the IEA maintains that investment in oil and gas production is crucial. At a recent meeting in Calgary, IEA deputy head Mary Burce Warlick emphasized the need for continued investment in oil and gas, stating that demand for these resources remains historically high.
Without project insurance, financing for oil and gas initiatives will become scarce, particularly for Western companies. This gap may lead to hydrocarbon projects being managed primarily by Asian firms or those from the Gulf Cooperation Council (GCC) region. As a result, energy security and economic growth could shift to non-Western players, bringing potential geopolitical risks.
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