Chubb Limited announced new underwriting criteria for oil and gas extraction projects yesterday that will require clients to reduce methane emissions.
Methane, a byproduct of oil and gas production, is one of the most severe greenhouse gases, the Chubb announcement said.
Explaining how the underwriting change will work, Chubb said the global insurer will continue to provide insurance coverage for clients that implement evidence-based plans to manage methane emissions. At a minimum, the clients must demonstrate they have programs for leak detection and repair in place.
Clients must also adopt demonstrated measures to reduce emissions from flaring (burning waste gases).
Chubb said 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. The carrier also plans to create a customer resource center to support oil and gas insureds in identifying and adopting methane emissions reduction technologies.
In addition to setting out the criteria for oil and gas extraction projects to continue to be covered, Chubb said it will not provide insurance coverage for oil and gas projects in government-protected conservation areas in the World Database on Protected Areas that do not allow for sustainable use. Protected areas designated by state, provincial or national governments include areas covered by International Union for the Conservation of Nature (IUCN) management categories I-V in the World Database on Protected Areas, which includes nature reserves, wilderness areas, national parks and monuments, habitat or species management areas, and protected landscapes and seascapes.
Chubb said 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.
In a statement about the new coverage rules, Evan Greenberg, chairman and chief executive officer of Chubb, said the methane-related underwriting criteria “are focused on the balance between the need to transition to a low-carbon economy and society’s need for energy security.”
“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, reiterating a stance he has taken publicly in the past. (Related article: Chubb Not Declaring Itself Net Zero, CEO Greenberg Says“) “We will continue to pursue in earnest a responsible, realistic and science-based approach,” he said, vowing that Chubb will work with oil and gas producer clients that are already committed to reduce GHG emissions, helping them to expand those commitments. For others, “implementing these underwriting criteria encourages oil and gas producers to adopt technologies to reduce GHG emissions in extraction.”
Continued Greenberg: “Our policy on not insuring energy projects in protected areas also reflects our approach to setting clear guidelines to sustain biodiversity and protect nature.”
“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 said.
The statement identifies Chubb as “the first insurer with significant U.S. operations “to limit coal-related underwriting and investment in 2019. The policy was later extended to oil sands projects underwriting. More recently, Chubb launched a new climate business unit, Chubb Climate+, which will provide a full spectrum 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. The business unit also provides risk management and resiliency services to help those managing the impact of climate change.
Source: Chubb Limited