Global insurer Chubb Ltd. is tightening its requirements on insurance policies for oil-and- gas producers, demanding that they reduce emissions of methane, a potent greenhouse gas.
Chubb, which is a top-10 insurer in the worldwide oil-and-gas market by premium volume, will also stop underwriting projects in areas designated as protected by state, provincial or national governments, effective immediately.
The company has been under pressure from climate activists, who have targeted banks and insurers to cut off funding and insurance coverage for fossil-fuel companies. Chubb’s actions fall short of their demands to quit sales to oil and gas producers.
Chubb Chief Executive Evan Greenberg said in an interview that the carrier’s move wasn’t motivated by activists’ pressure. The insurer’s plan is a “science-based and technical way” to help with carbon reduction, he said. As an underwriter, Chubb will be able to verify that clients are taking the required steps. “If not, then we won’t underwrite them,” he said.
A wholesale quitting of sales to producers, he said, puts at risk the nation’s energy security, because renewable energy isn’t ready to pick up the slack. “We’re trying to balance between society’s two competing interests,” he said.
He said many of the company’s oil-and-gas clients already have technology in place for reducing methane emissions, “and those that don’t, we’re giving them a grace period to put a plan in place.”
Methane is about 85 times more potent than carbon dioxide at trapping heat over two decades. Consequently, it accounts for about 30% of the rise in global temperatures observed since industrialization began, according to the International Energy Agency.
President Biden pledged to cut U.S. methane emissions by 30% by 2030. The Inflation Reduction Act signed into law in August includes provisions for a new $900-per-metric-ton tax on methane emissions from oil and gas producers. The tax goes into effect in 2024.
Some insurers and reinsurers have halted coverage for new oil- and gas-fields projects or in sensitive locations, environment groups say. Chubb’s action is different in that it aims to reduce emissions by developing best practices for existing operations of its clients, not to mandate blanket underwriting exclusions on most or all new fossil-fuel activity.
Chubb will require clients to provide “evidence-based plans” for managing their methane emissions, including at a minimum programs for leak detection and elimination of nonemergency venting. This is something producers sometimes do when prices are low.
Clients must also adopt one or more technologies that have been demonstrated to reduce emissions from flaring, which turns methane gas into carbon dioxide and water vapor. Chubb will help clients to identify the technologies.
Chubb is one of the world’s largest publicly traded property-casualty insurers, so activists have long had it in their sights, while other insurers watch its moves for competitive reasons.
In October, about 50 protesters gathered outside Mr. Greenberg’s New York City home with a mock oil derrick. The year before, they hauled an inflatable of his likeness to just outside the U.S. Open tennis tournament, where Chubb is a sponsor.
In interviews earlier this week, environmental groups said they wouldn’t cheer measures short of their endgame. Peter Bosshard, a director with Sunrise Project, which advocates globally for a rapid shift of capital from fossil fuels to renewable energy, said climate science “calls for a blanket stop to all new fossil fuel expansion projects—and a phase out of existing production over time.”
In 2019, Chubb was one of the first major insurers to limit coal-related underwriting and investment, a policy subsequently extended to oil-sands projects. In January, it announced a climate-specific business unit that will provide an array of insurance products and services “to businesses engaged in developing or employing new technologies and processes that support the transition to a low-carbon economy,” Chubb said.
Reinsurers, which back up insurers, have been more aggressive than primary insurers like Chubb in limiting coverage of fossil-fuel companies, activists say. More than a third of reinsurers have some sort of oil-and-gas exclusions, including Swiss Re, compared with 62% having coal-exit policies by late 2022, according to Insure Our Future, a coalition of activist groups. That compared with 15% of primary insurers that had such oil-and-gas exclusions, including big German insurer Allianz SE, the coalition said.