Residents of coastal Louisiana are facing growing risks from flooding and extreme weather, with options for home insurance vanishing as insurers leave the state. But the fossil fuel industry operating nearby has no such worries.
Liquefied natural gas (LNG) terminals have been springing up along the fragile Gulf coast, securing insurance even as their product contributes to the climate crisis and its growing risks, including more intense hurricanes and increased coastal flooding that are driving away residents.
For large projects such as LNG terminals, risk is spread among many insurers; no one company is exposed to all of a terminal’s potential losses. The same is not true for insurance companies whose business is built around residential policies where hurricane damage can lead to millions of dollars of claims at once.
But that outcome is more than an actuarial calculation for residents: when Hurricane Ida made landfall in south-eastern Louisiana in 2021, an 8ft storm surge swept over a 6ft Mississippi River levee in Ironton, flooding and destroying much of the small town, even dislodging caskets from their tombs.
Damage from Ida sent Louisiana’s property insurance market – already rattled by three major hurricanes in two years – into a full-blown crisis. By the end of 2022, nearly two dozen insurance companies had either left the state or gone under.
Residents scrambled for new, dramatically more expensive coverage or went without.
Meanwhile, just a few miles south of Ironton, a giant $20bn liquefied natural gas terminal is rising on a wedge of land between the Mississippi River and encroaching wetlands. Plaquemines LNG is one of eight terminals built or planned along Louisiana’s coastline.
“People who can leave have left,” Byron Encalade, president of the Louisiana Oystermen Association, said of his lifelong home, Plaquemines Parish, which includes Ironton.
“The insurance situation is just horrible. People still haven’t been paid fully for the damage [from Ida],” Encalade said, adding with soaring costs, some homeowners are paying more for their insurance than their homes.
The three parishes in Louisiana where LNG terminals are concentrated have all seen significant population decreases in the past two years, primarily driven by hurricanes.
As more residents leave, the parishes are less able to invest in the infrastructure that makes coastal communities livable, including schools, driving even more people away. “Over time it will diminish the fiscal capacity of the parish in terms of tax revenue to even recover next time,” Jesse Keenan, a professor of sustainable real estate at Tulane University, said. “Forget plan or prepare.”
“These parishes have terminal cancer, in the sense that these hurricanes are going to continue in their frequency and their intensity in ways that are really unprecedented,” Keenan said. “Insurance companies are aware of that.”
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Coastal Louisiana has always been in the path of storms, but it’s clear to Alex Kolker, a coastal geologist at the Louisiana Universities Marine Consortium, that more extreme weather is not only the state’s uncertain future: “It’s a very certain present.”
Warmer oceans and warmer air, Kolker said, provide more fuel for hurricanes, leading to stronger storms with more intense rains and harsher winds. Rising oceans raise the average level of the shoreline. “In Louisiana that’s compounded by the fact that the land is sinking, and it’s sinking relatively rapidly,” Kolker said.
While many of the world’s largest insurance and reinsurance companies have emissions targets and no longer insure coal projects, they have resisted calls to stop insuring fossil fuel projects entirely, despite their contribution to the climate crisis and increased global risk.
At the same time, state legislatures and Republican attorneys generals have threatened insurance companies for using environmental criteria when setting rates, spooking major insurers away from a UN-backed effort on cutting emissions.
The companies no longer insuring Louisiana homes are well-known, but those insuring LNG terminals are not. Government agencies require proof of insurance for fossil fuel projects, but those documents are often shielded from the public as developers claim confidential business information exemptions, even going to court to prevent insurers’ names from becoming public.
In early June, the anti-fossil fuel campaign Insure Our Future got a rare look into one gas export terminal in Texas: Freeport LNG. First published in E&E News, Freeport’s insurers are largely specialty or reinsurance companies, but a few are also involved in the property market, including Liberty Mutual, AIG and Chubb.
Most insurers and LNG companies contacted for this story – including AIG, Chubb, Liberty Mutual and Venture Global – either declined to comment or did not respond to requests for comment. While no insurance information for terminals in coastal Louisiana has become public, their insurers are likely to come from similar kinds of companies.
Oil and gas projects along the Gulf coast have long been “a major market” for specialty insurance carriers, said Jesse Keenan, the professor of sustainable real estate at Tulane University.
These projects have been profitable, he added, not because the rates they charge are comparably higher but because of the sheer size of the contracts. “The dollar amounts are very large and they have very high deductibles.” Each of the world’s largest insurance companies receives annual premiums from fossil fuel projects between $250-800m, according to an internal study commissioned by Insure Our Future from the market intelligence firm Insuramore.
For large projects such as LNG terminals, risk is spread among many insurers, as well as the developer itself through financial mechanisms like capital reserves, debt and equity.
LNG developers have made assurances to insurers and government agencies that levees, seawalls and other changes to their sites will protect the terminals – in the case of Plaquemines, a 26ft wall.
Further west, as many as seven LNG terminals could someday line the Calcasieu ship channel, which was inundated by a 17ft storm surge during Hurricane Laura in 2020, flooding and destroying parts of the city of Lake Charles. Sempra and Venture Global, the companies currently operating the two terminals along the channel, shut down ahead of the storm and reported no significant impacts.
Sempra Infrastructure, which runs Cameron LNG in south-western Louisiana, said the company had conducted flood, wind and storm surge studies at the site. As a result, Sempra raised the level of the facility overall and “critical equipment” above the level historically expected for an extremely rare flood event.
“These are all aspects that insurers use and take into account prior to insuring the LNG facility,” said Selby Bush Lilley, a vice-president of external affairs at Sempra.
But local and national advocacy groups aren’t convinced. Storm surge flooding is not the only concern, said Anne Rolfes, director of the Louisiana Bucket Brigade. “As if a big wall is going to prevent rain from falling on the facility. And it’s not going to stop the wind.”
