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Alaska strikes back at insurer use of underwriting to deny Arctic dev.
Kay Cashman Petroleum News
Alaska Gov. Mike Dunleavy told Charles Creitz of Fox News Dec. 8 that his administration is taking a close look at "friction points" with four insurers that may be making it harder to build things in Alaska.
"With respect to how our projects get insured, we're concerned that some of the underwriting standards being applied today -- particularly broad Arctic exclusions and long-range climate-driven policy restrictions -- may be shutting out responsible Alaska projects for reasons that have nothing to do with actual risk," he said.
Dunleavy said the letters sent out to insurers on Dec. 8 from Julie Sande, commissioner of the Department of Commerce, Community, and Economic Development, and Attorney General Stephen J. Cox with the Department of Law, are meant to start a dialogue with four major insurers so that state officials can better understand the insurers policies and underwriting criteria and clear up any "misconceptions about our state," per the Fox report.
The letters ask the insurers to contact Heather Carpenter, director of the Division of Insurance, part of the Alaska Department of Commerce, Community and Economic Development, within 10 business days "so we may schedule a meeting."
The letters were sent to the following:
Peter Zaffino, Chairman & CEO of American International Group Inc. (AIG) In New York City; Christopher J. Swift Chairman and CEO of The Hartford in Hartford, CT; Kristof Terryn, CEO of Zurich North America in New York City; and John Keogh, president and COO of the Chubb Group (Chubb) in Indianapolis, IN.
Form of gatekeeping The four letters begin as follows: "Our offices are jointly undertaking a comprehensive review of insurance carriers
operating in Alaska to ensure compliance with the State's insurance code and consumer protection laws and to advance a broader effort. We're strengthening Alaska's standing as a top, reliable place to invest. In recent years, Alaska ranked among the top five states in America to do business. That progress reflects deliberate work by the State to reduce barriers to investment and support industries that create jobs and opportunity for Alaskans. "But more remains to be done.
"As part of our review, we're testing whether insurance markets treat Alaska fairly and lawfully. Insurers, like other financial institutions, help decide which projects live or die. In recent years, Alaska and other energy states have been able to convince some investment banks that had attempted to de-bank Arctic energy projects to revisit their flawed assumptions about Alaska and start backing these projects again. But insurance coverage remains a problematic form of gatekeeping for the State. If insurers refuse coverage on non-actuarial grounds, investment stalls. And so does Alaska's economy.
"Alaska's insurance code is built on a central premise: underwriting decisions must rest on risk, and that means no discrimination based on extra-legal political, environmental, or long-range policy commitments. And where the insurance code doesn't reach, our consumer-protection statute prohibits unfair or deceptive acts or practices, which could include misrepresentations of compliance with Alaska law in contractual dealings. AS 45.50.471(a). "
To Zaffino the letter said, "We have substantial concerns about AIG's treatment of Alaska's oil and gas sector -- an industry that remains foundational to our State's economy and essential to future projects such as the Alaska LNG project. AIG's net-zero underwriting goal necessarily will result in emissions requirements that do not appear to be tied to short-term actuarial risk within the policy period.
"AIG's goal appears to be an effort to reshape a lawful sector according to AIG's long-term environmental commitments.
"AIG also has announced a categorical and immediate prohibition on providing insurance for any new Arctic energy exploration activities -- a prohibition that uniquely affects Alaska. Alaska has invested years of planning and permitting work to open responsible opportunity in the Arctic. AIG's policy is unacceptable, and no other State faces this kind of prohibition.
"AIG should take note that Alaska is home to significant conventional oil and gas reserves, world-class operators, modern pipeline systems, and one of the most robust safety and environmental frameworks in the nation."
The letter to Zurich points out that Zurich also "expressly excludes insurance coverage for oil and gas drilling and production projects and infrastructure in the Arctic" -- an exclusion that uniquely affects Alaska. Alaska has invested years of planning and permitting work to open responsible opportunity in the Arctic.
"Zurich's policy is unacceptable, and no other state faces this kind of exclusion."
The letters carry on in this vein.
Stay tuned for further news on this situation.
-KAY CASHMAN
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