Chubb demands oil and gas clients cut methane emissions

Chubb has announced new underwriting criteria for oil and gas extraction projects that will require clients to reduce methane emissions, a by-product in the extraction process that is among the most severe greenhouse gases. The insurer, one of the world’s leading carriers of oil and gas risks, also announced that it will not provide coverage for projects in key government-protected conservation areas that do not allow for sustainable use. Environmental campaign group Insure Our Future pointed out that this marks the first policy from a US insurer that applies to conventional oil and gas underwriting. The group said that it and its partners welcome Chubb’s move as a first step in aligning its oil and gas underwriting with environmental and human rights protection. But it said there are “major gaps” in the framework that will allow Chubb to continue insuring the expansion of many new oil and gas fields, all oil and gas pipelines and other midstream infrastructure projects that have not obtained the consent of impacted indigenous communities. “It must stop underwriting the expansion of fossil fuels everywhere,” said Insure Our Future. Chubb said its new underwriting criteria for oil and gas extraction is part of an ongoing collaboration and consultation with environmental stakeholders and experts. Evan Greenberg, the insurer’s chairman and CEO, said the move is part of the insurer’s ongoing commitment to support the green transition while also helping to deliver energy security. "The methane-related underwriting criteria that Chubb has adopted – the first of their kind in our industry – are focused on the balance between the need to transition to a low-carbon economy and society's need for energy security," he said. Greenberg stressed that Chubb is playing its part but does not believe that “sweeping net-zero pledges” are the way forward. Chubb, along with the other leading US-based insurers, are not members of the Net Zero Insurance Alliance (NZIA). NZIA members, which are all based in Europe and Asia Pacific and represent about 15% of global premiums, have committed to transition their insurance and reinsurance underwriting portfolios to net-zero greenhouse gas emissions by 2050. This is consistent with a maximum temperature rise of 1.5°C above pre-industrial levels by 2100. Greenberg is clearly not convinced. "As a company, we are accelerating and expanding our climate-related initiatives without committing to sweeping net-zero pledges for which, in our judgment, there is not a viable path to achieve,” he said. “We will continue to pursue in earnest a responsible, realistic and science-based approach. Implementing these underwriting criteria encourages oil and gas producers to adopt technologies to reduce GHG emissions in extraction. We know that many of our clients in the industry are already committed to limiting methane emissions and we will work to expand those commitments," he added. Key provisions in Chubb’s new underwriting standards are: Standards for methane emissions. Chubb said that it will continue to provide coverage for clients that implement evidence-based plans to manage methane emissions including, at a minimum, having in place programmes for leak detection and repair and the elimination of non-emergency venting. Clients must adopt one or more measures that have been demonstrated to reduce emissions from flaring. These criteria will commence immediately and customers will have a set period of time to develop an action plan based on their individual risk characteristics. Chubb will also create a customer resource center to support oil and gas insureds in identifying and adopting methane emission reduction technologies. Standards for protected conservation areas. Effective immediately, Chubb will not underwrite oil and gas extraction projects in protected areas designated by state, provincial or national governments. Chubb's policy applies to conservation areas covered by International Union for the Conservation of Nature (IUCN) management categories I-V in the World Database on Protected Areas. This includes nature reserves, wilderness areas, national parks and monuments, habitat or species management areas and protected landscapes and seascapes. The sixth IUCN category applies to protected areas that allow sustainable use. By the end of 2023, Chubb will develop and adopt standards for projects in category VI areas in the World Database of Protected Areas, as well as for oil and gas extraction projects in the Arctic, key biodiversity areas, mangrove forests and global peatlands that are not currently listed in the World Database on Protected Areas. "Our policy on not insuring energy projects in protected areas also reflects our approach to setting clear guidelines to sustain biodiversity and protect nature," said Greenberg. "Taken together, 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,” he added. Chubb is keen to promote its green credentials at a time when investors and other stakeholders are ramping up pressure on insurers to improve their ESG performance. Risk managers will increasingly take their carriers’ ESG performance into account when negotiating renewals, at least when the hard market finally ends. Chubb pointed out that back in 2019 it was the first insurer with significant US operations to limit coal-related underwriting and investment, a policy later extended to oil sands projects underwriting. More recently, it launched a new climate business unit called Chubb Climate+. It provides insurance products and services to businesses engaged in developing or employing new technologies and processes that support the transition to a low-carbon economy. The business unit also provides risk management and resiliency services to help those managing the impact of climate change. In January the company appointed a new global climate officer to help lead its climate activities. Environmental action groups welcome progress made by the insurance sector such as this. But they want to see more. Elana Sulakshana, senior energy finance campaigner with Rainforest Action Network, was quick to react to the news from Chubb. “This policy is a step in the right direction, as no insurer should be enabling new or existing methane-intensive oil and gas fields or extraction on protected lands. However, for Chubb to fully align with a safe climate pathway and a world in which ecosystems and human rights are protected, it must stop underwriting the expansion of fossil fuels everywhere,” she said. “As the IPCC report released this week makes clear, our window for action to secure a liveable and sustainable future for all is rapidly closing, and Chubb’s policies remain far from the scientific consensus that we cannot expand oil and gas production to stay within 1.5ºC,” she added.

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