Swiss insurance giant Chubb Ltd. said it will stop writing insurance policies for oil and gas extraction projects that do not have "evidence-based" methane reduction plans, increasing pressure on fossil fuel companies to participate in the fight against climate change.
Chubb, the world's largest publicly traded property and casualty insurer with a market capitalization of $77 billion, said it would help clients develop such reduction plans. The plans would require, at a minimum, programs for leak detection and repair, the adoption of proven measures to reduce flaring, and an end to nonemergency venting of wells. Nonemergency venting most often occurs when oil or natural gas prices are so low that it is cheaper to vent gas into the atmosphere than to pay for processing, transportation and storage.
"Our new underwriting criteria, along with our other substantive actions, are grounded in our commitment to lead the industry in the transition while balancing the need for energy security," Chubb Chairman and CEO Evan Greenberg said in a March 22 statement.
Insurance impact
The US companies most affected by the decision will be upstream independent oil and gas producers, according to Katie Bays, director of sustainable investment at energy transition consulting firm Adamantine Energy.
"Third-party insurance access is certainly a material issue for many upstream players," Bays said in a March 24 email.
"This is part of a larger theme of operators facing pressure from a variety of sources to keep pace with their industry partners' emissions reduction goals," Bays said. "Perhaps that pressure comes from shareholders, or from lenders, or from regulators, or, now, from insurers. But in any event, the pressure is there, and it's becoming more diversified."
Adamantine Energy CEO Tisha Schuller said many US operators are ahead of Chubb on environmental, social and governance efforts. "Best-in-class operators are already prioritizing addressing methane emissions as part of their energy-transition leadership," Schuller said in an email.
"Chubb's actions are more likely to affect slow adopters, who, in our review, have numerous energy transition risks — to which they may now need to add insurance costs," Schuller said.
Climate deadline
One of the groups that put pressure on Chubb is the shareholder advocate As You Sow Foundation, which filed for a shareholder vote on new greenhouse gas reduction targets at Chubb's annual meeting this year after a successful vote in 2022 on a similar greenhouse gas emission issue.
As You Sow President Danielle Fugere was pleased that Chubb is focusing on climate change but questioned how committed the insurance company is when it will not disclose its own or customer emissions. "Chubb's own reporting will not answer that question," Fugere said in a statement. "Chubb does not currently report the greenhouse gas emissions associated with its insuring, underwriting, and investing activities, so the company remains largely unaccountable to investors with regard to its climate contribution or its reduction of greenhouse gas emissions."
A March 20 report from the UN said the world has about nine years to avoid the start of climate catastrophe.
Chubb said the new criteria will take effect immediately but that it will give customers time to develop methane emissions reduction programs and install new equipment.
Chubb will also immediately stop writing policies for projects in conservation areas protected by state and national governments. The company said it would extend that ban later this year to projects in sensitive areas such as the Arctic.
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