Shareholders seek climate-related coverage information from Travelers

The Travelers Companies is being accused of turning to federal regulators to try and quash a shareholder proposal that asks the giant insurer to reveal the impact of climate-related price increases and coverage reductions on its profitability.

The shareholder resolution wants Travelers to come clean on the effect of its climate-related pricing and coverage decisions and how those decisions may affect its future business.

“Travelers has remained profitable in the face of extreme, climate-related weather events --including fires and hurricanes -- by significantly raising insurance premiums or ending coverage in catastrophe-prone markets,” says Danielle Fugere, president & chief counsel at As You Sow, a shareholder representative that promotes environmental and social corporate responsibility. “The question asked by shareholders is: ‘what is the expected impact of its climate-related pricing and coverage decisions on the sustainability of its homeowners' insurance customer base under a range of climate scenarios?’”

Vote sought at annual meeting

The shareholders want the proposal added to the company’s 2025 proxy statement and bring it to a vote at Traveler’s annual meeting, expected in May.

But Travelers has appealed to the Securities and Exchange Commission asking for a so-called “No Action” challenge” to the submission, saying the proposal “impermissibly seeks to micromanage the Company,” and that it is “not one that shareholders are well-equipped to evaluate.”

“The Proposal seeks to prescribe highly granular and specific disclosures that have no basis in the TCFD [Task Force on Climate-related Financial Disclosure] or any other well-established
climate-risk disclosure framework, including the TCFD’s supplemental guidance for insurance
companies,” wrote Yafit Cohn, Travelers’ chief sustainability officer & group general counsel in a letter to the SEC. “The Company further notes that it is not aware of any other insurance companies that provide disclosure similar to what the Proposal requests.”

As You Sow, however, has been successful with what companies sometimes call “gadfly proposals,” even in the face of “no-action” challenges. Last year, As You Sow’s resolutions urging Chubb, Berkshire Hathaway, and Travelers to disclose and reduce their greenhouse gas emissions from their underwriting and investment activities were approved by the SEC.

SEC asked to 'silence' Travelers  investors

“Rather than address these material questions, Travelers asked the SEC to silence its own investors,” said As You Sow CEO, Andrew Behar “How the SEC will decide is unknown and may be a harbinger of what's to come for responsible investors given the new administration's recent actions to curtail shareholder rights.”

The information the shareholders seek is undoubtedly complex and perhaps even proprietary. It asks for, among things:
• Projected percentage of policies not insurable due to climate risk.
• Projected climate-related policy non-renewals and rate increases.
• Related profitability impact.
• Risks to Travelers and its investments from associated climate-related municipal bond and housing market bubbles.

“As Travelers’ cancellations grow and climate-related rate increases out price its customer base, it is unclear how Travelers will successfully maintain its homeowner business line, which makes up 50% of its personal insurance business,” reads the proposal.

Travelers says polices are transparent

But Travelers maintains its policies and processes are transparent.

“In this case, the Proposal requests the disclosure of the expected impact of climate-related
pricing and coverage decisions on the sustainability of the Company’s homeowners’ insurance
customer base under a range of climate scenarios and time frames,” Cohn told the SEC. “The Proposal does not merely provide…’high-level direction on large strategic corporate matters.’ Rather, it seeks a level … that ‘inappropriately limits discretion’ of management in determining
the most relevant and impactful climate-related topics, requiring a prescriptive approach to climate risk identification and disclosure that ... is out of sync with well-established international reporting frameworks and the rest of the company’s industry.”

Nationwide, insurance premiums have increased 34% between 2017 and 2023, outpacing inflation by 40%, As You Sow notes. With premiums soaring and coverage shrinking for nearly half of homes in the United States, millions of Americans have been left uninsured or unable to afford coverage for their homes. Many Americans are also deciding to forgo insurance in hard-hit areas like Florida. A First Street report shows that the rising costs of climate change could “obliterate” nearly $1.5 trillion in U.S. home values.

“Insurers are competing for a quickly shrinking market amid a climate-fueled insurance crisis,” said Fugere. “Shareholders reasonably seek information on how this will impact Travelers’ future business and whether the company’s decisions are contributing to this growing problem. Travelers asserts that these questions are too complicated for shareholders to understand and that the proposal impermissibly ‘micromanages’ the company. To the contrary, investors are not dictating an overly specific action from the company related to how it can reduce its climate impact. Rather, they seek to understand how Travelers pricing and coverage decisions affect the long-term viability of the company.”

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Doug Bailey is a journalist and freelance writer who lives outside of Boston. He can be reached at [email protected].