In March 2023, Chubb, the world’s largest publicly traded property and casualty insurer, became the first US insurer to commit not to cover certain upstream oil and gas projects located in some protected areas. (1) In addition, Chubb also committed to provide coverage only for oil and gas clients which implement “evidence-based plans” to manage their methane emissions. While mitigating methane emissions of existing oil and gas operations is needed to avoid a climate breakdown, respecting this measure shall not justify the development of new oil and gas fields or new liquefied natural gas (LNG) terminals. According to the International Energy Agency (IEA), there is no room for any of these new projects in its net zero scenario by 2050, no matter where and by whom they are developed.
Key updates of the policy
Chubb sets exclusions for oil and gas extraction projects located in certain areas
The US insurer committed not to cover oil and gas exploration projects located in category I to V conservation areas of the World Database on Protected Areas (WDPA) such as projects located in natural parks or nature reserves. (1) Chubb must provide more transparency regarding the above-mentioned commitment: in particular, it is unclear if it will only apply to new oil and gas projects located in government-protected areas or both new and existing projects
Chubb will condition coverage for its oil and gas clients to the implementation of “evidence-based plans” to manage methane emissions
Chubb committed to keep covering its oil and gas clients if they implement plans to manage their methane emissions which include programs to reduce methane leaks, non-emergency venting, and flaring. Chubb stipulated that its requirement for an action plan to reduce methane emissions came into force at the date of announcement (2) without giving any more details about its sanctions for non-compliant clients.
Our analysis
THE POSITIVES
Chubb becomes the first US insurer to target new oil and gas extraction projects
Chubb is the first US insurer to stop covering some oil and gas extraction projects, beyond those developed in non-conventional sectors. Its competitors AIG, Travelers and The Hartford, also assessed in the annual survey Insurance Scorecard, had only very weak underwriting restrictions for companies involved in tar sand activities.
NEXT STEPS
Extend the underwriting restrictions to all new upstream oil and gas projects and LNG terminals
Current Chubb’s commitment only applies to oil and gas extraction projects located in very specific protected areas. It is a low-impact commitment for Chubb which allows the company to tackle a minor share of oil and gas expansion. The IEA projected the end of new oil and gas fields approved for development by the end of 2021 in its Net Zero Scenario (NZE) (3) without making any difference between new projects located in protected areas or elsewhere. Chubb must follow its global competitors with a net zero pledge such as Allianz, Munich Re, Hannover Re or Generali which committed not to insure any new oil and gas fields, no matter their location.
Condition insurance coverage to a halt of new upstream and midstream oil and gas projects
Action plans to reduce methane emissions (4) are required to reduce greenhouse gas emissions released along the oil and gas value chain. However, by asking its clients to implement action plans in order to reduce their methane emissions, Chubb addresses only part of the problem. To be consistent with the latest scientific findings to limit global warming by 1.5°C, Chubb must condition its insurance policies not only to a “methane plan”, but also a commitment not to develop new upstream and midstream oil and gas projects, including new LNG terminals.
Reclaim Finance welcomes Chubb’s new oil and gas underwriting guidelines which becomes the first example of an insurer in the United States committing not to cover some oil and gas extraction projects beyond the unconventional sector. Chubb, in line with its goodwill to “support a global transition to a net zero economy by 2050” must now extend its new oil and gas underwriting policy to any new oil and gas field being developed after 2021 and new LNG terminals, in line with IEA’s latest projections to reach net zero emissions by 2050.
For more information regarding Chubb’s sectoral policies on coal and oil & gas, you can refer to the following tools : the Coal Policy tool and the Oil and Gas Policy Tracker
