Insurance firm Britam has pulled out of a deal to underwrite the East African Crude Oil Pipeline (Eacop) after the firm’s own internal environmental and social risk assessment revealed that its participation in the $5 billion project was against its backers’ violated policy and performance standards.
Details of the Britam withdrawal emerged in a response filed on November 8 to a complaint raised last year with the Compliance Adviser Ombudsman – an independent agency of the World Bank – which revealed that Britam turned away from the Eacop after conducting a review of the environmental and social risks.
“There are indications of a plausible link with harm or risk of harm to the complainant related to the subproject,” read the response of the Inclusive Development International in October 2021, which the International Finance Corporation (IFC), which finances Britam , questioned. one of Eacop insurers. The IFC is a World Bank affiliate.
Britam is a client of the IFC, and the latter has an investment of $35 million in the insurer, and as such is billed as one of the giants of the local insurance industry, giving it the ability to cover Eacop and the upstream projects Tilenga and securing Kingfisher.
The complaint questioned the regional insurer’s proposed participation in the underwriting of the pipeline by Insurance Consortium for Oil and Gas Uganda, arguing that Eacop and related oil projects do not meet IFC’s standards.
These include failure to meaningfully consult local communities, provide adequate and prompt compensation to communities whose land is acquired, ongoing threats and retaliation against human rights defenders opposed to the project and expected irreversible impacts on sensitive ecosystems such as Murchison Falls National Park.
Britam, a Kenya-based financial services provider, becomes the latest in a series of financiers caught between the desire to do business with Uganda’s Lake Albert fossil fuel projects and the growing campaign by climate advocates to ban oil and gas projects. abandoning favors of renewable energy. .
Standards in question
As IFC’s client, Britam had to ensure that any high-risk project it insured met IFC’s environmental and social performance standards.
“Britam’s decision validates our assessment and confirms what we already knew: The Eacop does not meet international standards,” says Coleen Scott, a legal and policy associate at Inclusive Development International.
“This is a huge wake-up call for any insurance company or Equator Bank that is still supporting or considering Eacop. Britam should make its evaluation fully public, so that other insurers and banks can consider the findings when making their own decisions about this project,” she said. added.
It remains to be seen how Britam’s withdrawal will affect TotalEnergies and China National Offshore Oil Corporation, both of which have sided with Uganda in publicly defending Eacop as a project that meets IFC’s environmental and social standards. end financing and insurance coverage for the pipeline.
According to Ibrahim Kaddunabbi Lubega, chief executive of the Uganda Insurance Regulatory Authority, the consortium placed insurance for Eacop, Tilenga and Kingfisher on June 1, 2022. The question was whether the local industry has the capacity to insure projects worth $10 billion.
Furthermore, under Uganda’s EACOP Special Provisions Act, local firms can only insure up to 30 percent of risks, but industrial giants from Europe who are expected to take up the larger portion continue to avoid the projects.
Omar Elmawi, the coordinator of the StopEacop coalition says Eacop still needs significant foreign insurance and reinsurance support because a significant part of reinsurance must come from international firms that have the appropriate credit ratings and financial capacity to absorb the losses if and when accidents occur. .
“We have yet to hear any confirmation of an international insurer committing to insure Eacop, which means they still have a big task ahead of them to get this project off the ground,” he says.
Dennis Kakembo, the Managing Partner at Cristal Advocates, and an energy law expert also cast doubt on the ability of the local industry to underwrite these mega projects.
“Insurance was a controversial clause in the creation of this law,” he says. “We know that no one has the ability to insure all the risks 100 percent. Even if they reinsure with companies like Uganda Re, Zep Re and Africa Re, you will still see them fix it.”
“As I am not the project owner, I am not in a position to discuss this,” said Alex Mukasa, Marsh McLennan Uganda CEO.
WRITTEN BY JULIUS BARIGABA