DEFA14A: Chubb Expands Oil and Gas Underwriting Criteria, Rejects Scope 3 Emissions Reporting Proposal

Chubb Limited has updated its oil and gas underwriting criteria and is urging shareholders to vote against a proposal requiring Scope 3 greenhouse gas emissions reporting.

Summary

• Chubb Limited has supplemented its proxy statement to update shareholders on the adoption of additional science-based oil and gas underwriting criteria.
• The company is responding to a notice of exempt solicitation filed on April 18, 2024.
• The Board of Directors recommends shareholders vote against Agenda Item 15, a shareholder proposal on Scope 3 greenhouse gas emissions reporting.
• In April 2024, Chubb expanded its oil and gas underwriting criteria, initially established in March 2023, to include larger oil and gas companies and new standards for midstream activities.
• The criteria apply to property, casualty, environmental, and financial lines of insurance for upstream and midstream operations.
• Chubb believes its underwriting criteria, combined with Chubb Climate+, is more effective than the climate strategy advocated by the proposal proponents.
• For oil and gas producers with annual revenues less than $1 billion, Chubb will continue to provide insurance coverage for clients that implement evidence-based plans to manage methane emissions.
• For oil and gas producers and midstream operations with annual revenues greater than $1 billion, Chubb expects insureds to achieve a methane emissions intensity of 0.2% or less by 2030 across their global operations.
• Chubb will no longer underwrite oil and gas extraction projects in IUCN management categories I-V in the World Database on Protected Areas, including the Arctic National Wildlife Refuge (ANWR).
• Chubb is developing standards for projects in category VI areas and for oil and gas extraction projects in the Arctic, Key Biodiversity Areas, mangrove forests, and global peatlands.
• Chubb was the first major insurer in the U.S. to announce a policy concerning thermal coal-related underwriting and investment in 2019.
• Chubb does not believe that disclosure of Scope 3 GHG emissions provides a meaningful basis to evaluate Chubbs actions to address climate change or manage our climate-related risk.

Sentiment

Score: 7

Explanation: The document presents a proactive stance on climate change through underwriting criteria, but also faces shareholder pressure regarding Scope 3 emissions reporting. The sentiment is moderately positive due to the company's actions, but tempered by the ongoing debate.

Positives

• Chubb has expanded its oil and gas underwriting criteria to address larger companies and midstream activities.
• The company is providing resources and support through its risk engineering services and the Chubb Methane Resource Hub.
• Chubb was the first major U.S. insurer to announce a policy concerning thermal coal-related underwriting and investment.
• Chubb has a comprehensive climate change strategy focused on the role of insurance and its influence on GHG emissions.

Negatives

• Chubb is facing a shareholder proposal (Agenda Item 15) regarding Scope 3 greenhouse gas emissions reporting, which the Board recommends voting against.
• The company rejects the premise that measuring Scope 3 emissions and setting explicit targets is the only way to achieve valid climate action.

Risks

• Potential policyholders may not meet Chubb's methane performance expectations, leading to declined coverage.
• The effectiveness of Chubb's underwriting criteria in reducing GHG emissions depends on the actions of its insureds.
• There is a risk of reputational damage if Chubb's climate strategy is perceived as insufficient by stakeholders.

Future Outlook

Chubb will continue to develop and implement climate underwriting criteria and expand the Chubb Methane Resource Hub.

Management Comments

• Our Board requests shareholders consider this proxy statement supplement as part of the evaluation of Agenda Item 15, the shareholder proposal on Scope 3 greenhouse gas emissions reporting, which our Board recommends that shareholders vote AGAINST.
• We believe the implementation of underwriting criteria, combined with our other climate strategy pillars, including underwriting net-zero solutions through Chubb Climate+, is more impactful, more data-driven, and a better use of our resources than the climate strategy advocated by the Proponents in their notice of exempt solicitation.
• As we have previously stated, we do not believe that disclosure of Scope 3 GHG emissions provides a meaningful basis to evaluate Chubbs actions to address climate change or manage our climate-related risk.

Industry Context

Chubb's actions are positioned as leadership in the insurance industry regarding climate change, particularly in comparison to banks' approaches to Scope 3 emissions.

Comparison to Industry Standards

• Chubb highlights its leadership by being the first major insurer in the U.S. to announce a policy concerning thermal coal-related underwriting and investment.
• The document contrasts Chubb's approach with that of banks, citing a European Central Bank study that found no evidence that net-zero commitments by banks lead to greener capital allocation or increased climate commitments from their clients.
• The document suggests that Chubb's underwriting criteria are more tangible and effective than the Scope 3 emissions counting efforts of some banks.

Stakeholder Impact

• Shareholders are being asked to vote on a proposal related to Scope 3 emissions reporting.
• Insureds in the oil and gas industry will be affected by the updated underwriting criteria.
• The company's actions may impact its reputation among stakeholders concerned about climate change.

Next Steps

• Shareholders will vote on Agenda Item 15, the shareholder proposal on Scope 3 greenhouse gas emissions reporting, at the Annual General Meeting on May 16, 2024.
• Chubb will continue to develop standards for projects in category VI areas and other sensitive areas.
• Chubb will continue to expand the Chubb Methane Resource Hub.

Key Dates

Keywords

underwriting, climate change, methane emissions, oil and gas, Scope 3 emissions, insurance, Chubb, GHG emissions, coal, oil sands