Travelers Challenges Shareholder Climate Risk Proposal
Travelers is seeking to block a shareholder proposal that requests more detailed reporting on climate-related financial risks. The insurer has asked the U.S. Securities and Exchange Commission (SEC) to allow it to exclude the proposal from its proxy materials, arguing that current disclosures adequately address these risks.
Proposal Details
The proposal, submitted by the environmental advocacy group As You Sow, calls for greater transparency regarding how climate-related factors could affect Travelers’ homeowners insurance business. Specifically, As You Sow wants the insurer to disclose:
- Expectations regarding policy uninsurability due to climate risk
- Anticipated impact of nonrenewals and rate adjustments on profitability
- Potential financial impacts from climate-related municipal bond risks and housing market fluctuations
Travelers, in its 2023 annual report, stated that climate change is a long-term issue, but that its annual policy renewals allow it to adapt to changing conditions through rate adjustments and underwriting modifications. As You Sow, however, counters that Travelers hasn’t adequately explained how it plans to maintain profitability amid these changes, particularly as more policies shift to state-backed insurers of last resort.
Market Position and Recent Losses
In 2023, Travelers held the ninth-largest market share for homeowners multiperil insurance in California, with a 4.04% share based on direct premiums. The company has preliminarily estimated $1.7 billion in pretax catastrophe losses from the January wildfires in Los Angeles. A Travelers executive noted that the company avoided covering the most high-risk properties and some policies lacked wildfire coverage after the fires.
Climate-Related Disclosure Landscape
Insurers in the U.S. are subject to evolving climate-related disclosure requirements. California has implemented specific mandates, with the National Association of Insurance Commissioners (NAIC) updating its climate risk disclosure survey in 2022 to align with the Task Force on Climate-related Financial Disclosures (TCFD) recommendations.
Insurers above $100 million in direct written premiums must annually disclose information on governance, risk management, strategy, and metrics and targets. Further, California’s Senate Bill 261, effective January 1, 2026, mandates companies with over $500 million in revenue doing business in the state to report on climate-related financial risks. However, insurance companies are currently exempt from SB 261 and instead subject to the NAIC’s standards.
Travelers’ Argument
Travelers contends that its existing annual reports already provide sufficient information on climate-related risks, including investments in technology and workforce initiatives designed to manage weather and climate-related risks. The company argues that the shareholder proposal seeks disclosure requirements that exceed established frameworks like the TCFD. Travelers claims that it is unaware of any insurance carrier providing the level of detail requested by As You Sow.
The insurer believes the proposal would override management’s discretion, describing the requested reporting as overly detailed and prescriptive. Travelers has requested the SEC staff to confirm that they will not recommend enforcement action if the company omits the proposal from its annual shareholders’ meeting.
