Most insurers still back LNG expansion in Coral Triangle, despite biodiversity risks

Key points

• Only one insurer underwriting LNG expansions in the Coral Triangle has introduced limits on LNG expansion in the biodiverse marine area after being approached by a concerned group of NGOs.
• There are several dozen planned LNG projects amid an Asian energy crunch under pressure from the US-Israeli war in Iran.
• The NGO coalition Insure Our Future pointed to concerns around biodiversity risk as well as climate risks such as intensified typhoons, storm surge and coastal flooding.

Despite mounting evidence of the risks that fossil fuel development poses to the world’s most biodiverse marine ecosystem, most of the world’s largest insurers have yet to rule out support for liquid gas expansion in the Coral Triangle.

Among the 30 insurers that NGO coalition Insure Our Future reached out to with demands to cease underwriting fossil fuel projects in the biodiversity hotspot, only one – France’s Scor – has introduced new LNG expansion restrictions.

“Other insurers and reinsurers like AXA, who claim to be strong advocates for biodiversity, should take note,” says Ariel Le Bourdonnec, an insurance campaigner at Reclaim Finance.

“Their existing underwriting policies restricted to UNESCO World Heritage Sites or certain categories are not enough to protect the Coral Triangle. They must recognise the risks that fossil fuel development poses to this precious biodiversity area”.

The Insure Our Future coalition of over 70 civil society groups noted that Allianz, Aviva, AXA, Generali, Hannover Re, Talanx, MS&AD, Munich Re, Sompo, Swiss Re and Tokio Marine responded to its engagement but declined to introduce dedicated protections for the Coral Triangle. Meanwhile other insurers, including Berkshire Hathaway, Chubb, Travelers, Zurich and Lloyd’s either did not respond or declined to engage substantively.

Energy expansion in Asia

Spanning Indonesia, Malaysia, Papua New Guinea, the Philippines, Solomon Islands and Timor-Leste, over 360 million people living in the Asia Pacific region rely on the Coral Triangle natural coastal protection and other economic benefits, including food security and tourism. It is also home to 76% of global coral species and over 2,000 species of reef fish.

As of January 2024, there were 19 LNG terminals currently in operation and at least 27 more planned in the Coral Triangle.  Many of these are located near coral reefs, mangroves and seagrass ecosystems. If fully developed, planned gas projects could lead to an 80% increase in LNG import capacity in Southeast Asia.

Asia has been the hardest hit by the energy shocks on the back of the US-Israeli war on Iran, with the fossil-dependent region seeing the biggest surge in LNG prices since 2023. Disruptions in fuel supplies at the Strait of Hormuz have also had knock-on effects on inflation – through rising fertiliser and food prices – as well as fiscal budgets, with governments raising subsidies to cushion consumers from rising fuel costs.

“Even before the Strait of Hormuz closure, LNG and large-scale gas turbines may be too expensive for Southeast Asia to integrate at the speed industry requires to absorb their planned expansion,” says Christopher Doleman, Asia gas specialist at the Institute for Energy Economics and Financial Analysis (IEEFA). “Moreover, evidence is emerging that solar combined with batteries can now competitively provide firm power at rates that undercut the price provided by LNG”.

“The current energy crisis provides an opportunity to catalyse a low-cost energy transition towards renewables – one that could negate the need for further investments in gas infrastructure across the Coral Triangle,” he adds.

Risks involved in LNG buildout

Apart from biodiversity risks associated with continued LNG expansion in the Coral Triangle, LNG infrastructure in the region is highly exposed to climate-related physical risks, including intensified typhoons, storm surge and coastal flooding, Insure Our Future warns in a briefing note.

For instance, nearly 90% of the planned floating terminals in Southeast Asia – particularly in the Philippines and Vietnam – are highly exposed to weather risks, according to the Institute for Energy Economics and Financial Analysis.

The LNG market is also expected to reach its peak supply in 2030, given the current growth trajectory of renewables and a decline in LNG competitiveness, creating a high risk of LNG overcapacity, campaigners say.

The Philippines, Pakistan, India, Thailand and China have all seen LNG demand decline or plateau. As a result, US$379bn in new gas infrastructure investments in Asia risk becoming stranded assets, they add.

The International Energy Agency (IEA) has previously warned that up to 75% of LNG projects under construction today may fail to recover their capital under a 1.5°C-aligned scenario, as capital-intensive projects – notably in Asia – would be forced to close before their technical lifetimes.

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