Response to media reports claiming that EACOP is fully insured
Recent media reports in the Independent and Nile Post suggest that the EACOP has been fully insured and reinsured with local firms through the Insurance Consortium for Oil and Gas in Uganda (ICOG). We believe this information is misleading—numerous official documents indicate (and standard practice in the industry would suggest) that a significant portion of (re)insurance coverage for the EACOP project will have to come from foreign sources and there is no reason to believe that coverage has been secured. In fact, many of the larger global firms that would normally be expected to take this on have publicly committed not to get involved in this project.
The #StopEACOP Campaign has been aware of the ICOG since its establishment by the Insurance Regulatory Authority of Uganda. The ICOG was created to support implementation of Uganda’s Insurance Act, which stipulates that insurance services must be provided by local insurers first, before international insurance or reinsurance is sought. This aligns with the local content requirements of the EACOP (Special Provisions) Act (2021), which ensures that local reinsurance providers (Uganda Re, Zep Re and Africa Re) are offered the opportunity to provide reinsurance for up to a maximum of 30% of the project. This is public information which has been known for a long time.
“The Act states: “Subject to subsection (6), the insurers shall, in accordance with this Act and Ugandan law, offer to place mandatory reinsurance cessions with Uganda Re, Zep RE and Africa Re for the value of up to 30% of the risks related to the EACOP project existing in Uganda.””
However, it is our understanding that the EACOP project still requires significant foreign insurance and reinsurance support. In accordance with the EACOP Act, a substantial portion of reinsurance (the other 70%) should come from international reinsurance companies, which have the appropriate credit ratings and financial capacity to absorb the losses if and when accidents occur. This is further evidenced in the June 2021 tender for an EACOP insurance broker, which specified that the broker would be responsible for “the reinsurance placement in the international reinsurance markets and local markets as required by the laws and various agreements.” There is no indication that international reinsurance has been sourced, and this does not appear to be disputed by recent statements from Uganda’s Insurance Regulatory Authority or members of the ICOG.
As the Independent reported, “While the local insurers under the consortium may be able to underwrite aspects of the oil and gas projects, some of the experienced players in the insurance industry have maintained that there will still be a need to attract foreign insurance firms.” According to the CEO of local insurance brokerage firm Minet Uganda, “whereas we have the Uganda Insurance Consortium taking part of the risk, the other aspect of the risk will be re-insured in the international market.” Other experts mentioned in the article have suggested that “the limited number of reinsurance firms in Uganda may further limit the share of the risk to be retained in Uganda.” The CEO of Uganda’s Insurance Regulatory Authority said in a statement to the Nile Post that, while the policies the ICOG has the capacity to underwrite have been finalized, “there are many other policies,” that still need to be taken up. Therefore, it is misleading to claim that the project has been fully insured and reinsured.
The world's top four international reinsurers, Munich Re, Swiss Re, Hannover Re and SCOR—any one of which would normally act as a lead reinsurer of such a major project—have all clearly stated that they will not reinsure the EACOP, often citing environmental and social concerns. A growing number of other leading international insurers have taken the same position, including Talanx today and 3 others just last week.
The question of where or if EACOP will find international insurance/reinsurance cover remains very much open and the pressure on international reinsurers, and on the EACOP insurance broker Marsh, to distance themselves from this ecological and social disaster grows every day.
#StopEACOP continues to call on (re)insurers to abstain from providing (re)insurance to the EACOP project. It is the socially, environmentally and economically right thing to do.