Leading African insurer Britam latest to pull cover from EACOP pipeline

Britam Holdings, a leading east African insurance group and client of the World Bank’s International Finance Corporation (IFC), is the latest carrier to pull capacity from the planned East African Crude Oil Pipeline (EACOP) after conducting a review of the environmental and social risks involved, according to reports.

This follows the recent news that QBE, Suncorp, Generali, Aspen and Helvetia have all ruled out cover for the EACOP. Some 18 insurance companies have now made this commitment, according to environmental campaigners.

This is a major blow to the project developers, including TotalEnergies and China National Offshore Oil Corporation (CNOOC), which have publicly asserted that the EACOP meets the IFC’s environmental and social standards to secure financing and insurance coverage.

Britam’s decision was confirmed in official correspondence seen by Commercial Risk from the Compliance Advisor Ombudsman (CAO), the IFC’s independent accountability mechanism, in response to a complaint submitted by affected communities in Uganda, represented by Inclusive Development International.

According to the letter seen by Commercial Risk, the accountability office confirmed that Britam decided not to participate in underwriting risks associated with the oil pipeline and connected oil fields and refinery, after conducting an environmental and social risk evaluation of the projects.

As an IFC client, Britam is required to ensure that any high-risk project it insures meets IFC’s environmental and social performance standards.

The letter alleges that Britam intended to insure the EACOP through the Ugandan Insurance Consortium for Oil and Gas, and sets out evidence showing the ways in which the pipeline and associated oil projects fail to meet the IFC’s standards.

These include, among others, failure to meaningfully consult local communities, failure to provide adequate and prompt compensation to communities whose land is being acquired, and ongoing threats and retaliation against human rights defenders opposed to the project. The letter also lists anticipated irreversible impacts on sensitive ecosystems such as Murchison Falls National Park in northwestern Uganda.

Earlier this year, Inclusive Development International, BankTrack and the African Institute for Energy Governance published a report that assessed whether the EACOP conforms with the IFC’s performance standards and the equator principles, a set of guidelines for the banking industry that are based on the IFC standards.

“Britam’s decision validates our assessment and confirms what we already knew: the EACOP fails to comply with international standards,” said Coleen Scott, a legal and policy associate at Inclusive Development International.

“This is a major wakeup call to any insurance company or Equator Bank still providing or considering support for EACOP. Britam should release its evaluation in full, so that other insurers and banks can consider the findings when making their own decisions regarding this project,” she added.

Two of the EACOP’s financial advisers and potential lenders, Standard Bank and Sumitomo Mitsui, are signatories of the Equator Principles.

The banks have come under fire for their role in the project, with Standard Bank stating that it will not fund the EACOP unless it complies with the principles.

An environmental and social assessment carried out on behalf of the banks by the consultant Golder Associates, which has not been released to the public, reportedly found “no red flags”.

Britam’s decision to withhold support following its evaluation calls into question the credibility of Golder’s findings, say environmental pressure groups.

“The tide is turning on the EACOP,” said David Pred, Inclusive Development International’s executive director. “Building a massive fossil fuel project when the world is urgently transitioning to renewable sources of energy is infuriatingly shortsighted and it’s the last thing communities along the EACOP’s route need to create lasting economic opportunity.”