| 10050 |
| Progressive Security Insurance Company |
| Property & Casualty |
| Y |
| 0155 |
| Progressive Insurance Group |
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1. Disclose the insurer's governance around climate-related risks and opportunities.
In disclosing the insurer's governance around climate-related risks and opportunities insurers should consider including the following:
• Identify and include any publicly stated goals on climate-related risks and opportunities.
• Describe where climate-related disclosure is handled within the insurer's structure, e.g., at a group level, entity level, or a combination. If handled at the group level, describe what activities are undertaken at the company level.
A. Describe the board and/or committee responsible for the oversight of climate-related risks and opportunities.
In describing the position on the board and/or committee responsible for the oversight of managing the climate-related financial risks, insurers should consider including the following:
• Describe the position on the board and/or committee responsible for the oversight of managing the climate-related financial risks.
B. Describe management's role in assessing and managing climate-related risks and opportunities. |
| This submission includes information from The Progressive Corporation and its subsidiaries (collectively referred to as Progressive).
Forward-Looking Information: This survey provides an overview of some of Progressive’s long-term goals and aspirations, and efforts in support of these goals and aspirations. Investors are cautioned that certain statements in this questionnaire, including those relating to our goals and aspirations, not based upon historical fact are forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. These statements often use words such as “estimate,” “expect,” “intend,” “plan,” “believe,” “goal,” “target,” “anticipate,” “will,” “could,” “likely,” “may,” “should,” and other words and terms of similar meaning, or are tied to future periods, in connection with a discussion of future operating or financial performance. Forward-looking statements are not guarantees of future performance, are based on current expectations and projections about future events, and are subject to certain risks, assumptions, and uncertainties that could cause actual events and results to differ materially from those discussed herein. For a discussion of the assumptions, risks, uncertainties, and other important factors that could cause actual events and results to differ materially from those discussed in this questionnaire, see our most recent reports and other documents filed with the United States Securities and Exchange Commission, including, without limitation, the Risk Factors section of our Annual Report on Form 10-K for the year ending December 31, 2022. Any forward-looking statements are made only as of the date presented. Except as required by applicable law, we undertake no obligation to update any forward-looking statements, whether as a result of new information, future events or developments or otherwise.
Our Board of Directors is ultimately accountable for overseeing Progressive’s risk profile and its risk management processes. To facilitate these oversight responsibilities, the Board assigns certain risk oversight to each of its main committees through each committee’s charter, which enables the Board to function more effectively. The Audit Committee oversees risks relating to financial statements, financial controls, internal and external audit functions, and external reporting. In addition, the Audit Committee oversees our Enterprise Risk Management (ERM) program which is conducted by our Management Risk Committee (MRC) and the full Board receives an update at least annually. The Nominating and Governance Committee is responsible for overseeing and addressing risks relating to the Board’s and Progressive’s governance practices, stakeholder concerns, and environmental (including climate change), and social factors and initiatives impacting us.
Our MRC coordinates risk management activities, including risk assessments and oversight of key risk-related initiatives. Several members of the MRC conduct, and all of the MRC participates in, our annual enterprise risk assessment and, with input from executive management, identifies the most critical risks facing the company. The MRC then formulates recommendations for managing identified risks and presents these recommendations to the Audit Committee for review. The MRC’s membership, comprised of members of management representing a cross-section of business units and functions, is intentionally multidisciplinary, ensuring strong risk management across Progressive. The MRC is co-chaired by our Audit Business Leader, Treasurer, and Corporate Ethics & Compliance Officer. Our Chief Financial Officer, Chief Legal Officer, and Chief Investment Officer serve as executive sponsors.
The Treasurer and Audit Business Leader provide an annual overview of the ERM program and our progress in managing key risks to the Audit Committee and the full Board of Directors. Meanwhile, our Executive Team is tasked with the annual review of the enterprise risk assessment process itself, approving and ensuring the execution of action plans that have been developed to manage, mitigate, or transfer identified enterprise risk areas, and defining strategic initiatives.
We manage climate risks through our ERM program. Our MRC is charged with understanding our climate-related risks, among other things. In the MRC’s annual risk assessment process, we evaluate the longer-term effects of climate change and attempt to evaluate the impact on capital, pricing, our customers, and investments. Because we integrate this activity into our enterprise-wide risk framework, we believe climate risk assessment and all the other risks we assess, could affect the long-term strategy of the company as we continue to react to new information and adjust our plans. As an insurer of weather-related losses, we take a serious interest in our climate and its changes. Changing climate conditions— whether due to global climate change or other causes —may change how often severe weather events and other natural disasters occur, how long they last, how much insured damage they cause, and where the events occur. Therefore, the possibility of increasingly frequent or severe weather events is part of our risk-based pricing process. The risk management processes include climate change in its processes. Having short durations for policy periods (6 and 12 months), our claims inventory, and our investment portfolio means we can assess our risks frequently (See our 2022 Annual Report on Form 10-K and any subsequent Quarterly Reports on Form 10-Q for a full discussion of risk factors).
We believe that managing climate change-related risks can help reduce expense and offer competitive rates while maintaining our obligations to our customers. We continue to encourage greater awareness of the impact of climate change and severe weather as noted in our 2022 Corporate Sustainability Report (CSR). We report our environmental efforts to inform our stakeholders of the efforts we are making, the initiative and steps taken, and the progress made on our commitments. Our CSR describes our energy and carbon emissions management, including details on our carbon emissions reductions, our commitment to reduce our fleet’s carbon emissions, and our responsible waste management and paper reduction efforts.
This survey uses certain terms, including "material," “significant,” and other words and terms of similar meaning. Used in this context, these terms should not be confused with terms such as “material” or “materiality,” as defined by or construed in accordance with U.S. securities laws or as used in the context of U.S. GAAP financial statements and financial reporting. Also see the response below to items 3 and 4. For additional information on these topics, refer to Progressive’s 2023 Proxy Statement and 2022 CSR. |
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2. Disclose the actual and potential impacts of climate-related risks and opportunities on the insurer's businesses, strategy, and financial planning where such information is material.
In disclosing the actual and potential impacts of climate-related risks and opportunities on the insurer's businesses, strategy and financial planning, insurers should consider including the following:
• Describe the steps the insurer has taken to engage key constituencies on the topic of climate risk and resiliency.
• Describe the insurer's plan to assess, reduce, or mitigate its greenhouse gas emissions in its operations or organizations.
A. Describe the climate-related risks and opportunities the insurer has identified over the short, medium, and long term.
In describing the climate-related risks and opportunities the insurer has identified over the short, medium, and longer term, insurers should consider including the following:
• Define short, medium, and long-term, if different than 1-5years as short term, 5-10years as medium term, and 10-30years as long term.
B. Describe the impact of climate-related risks and opportunities on the insurer's business, strategy, and financial planning.
In describing the impact of climate-related risks and opportunities on the insurer's business, strategy, and financial planning, insurers should consider including the following:
• Discuss if and how the insurer provides products or services to support the transition to a low carbon economy or helps customers adapt to climate-related risk.
• Discuss if and how the insurer makes investments to support the transition to a low carbon economy.
C. Describe the resilience of the insurer's strategy, taking into consideration different climate-related scenarios, including a 2 degree Celsius or lower scenario. |
| We write personal and commercial auto insurance, residential property insurance, limited commercial property insurance for small businesses, and other specialty property-casualty insurance, and provide related services, predominantly in the US. Our physical facilities are located only in the US. A vast majority of our policies are written for individual consumers. Our principal business is insuring autos and other vehicles (motorcycles, boats, RVs, etc.) owned by individuals. Our insurance policies are predominately issued with 6- to 12-month terms.
Our non-vehicle commercial business, such as commercial property or business interruption insurance, constitutes a very small percentage of our business. We also do not insure large commercial companies whose businesses could be significantly impacted by climate related developments. Moreover, we use reinsurance in our Property business to reduce exposure to certain catastrophe events.
For Progressive, we believe that climate risk often manifests as weather risk. Losses and loss adjustment expenses are our largest liability, and severe weather (e.g., catastrophe events) can have a significant impact on those liabilities. Catastrophe events can potentially impact our pricing risks and the availability and cost of reinsurance. These events may be becoming more severe and less predictable as a result of climate change. Catastrophe losses have had, and in the future could have, a material effect on our operating results. Changes in climate conditions may adversely impact the accuracy of the modelling tools that we use to estimate our exposures to catastrophe events. Read together, these potential risks indicate that our loss exposure, pricing and reinsurance risks might be impacted by climate change. During 2022, we determined that other potential related risks warranted continued monitoring, analysis and understanding as events develop, but not specific risk management efforts. We are mindful that new regulations and societal pressures relating to ESG and other public policy matters could negatively impact our returns or cause us to change our investing strategies in ways that could negatively impact our results. At Progressive, insurance is understood as the pricing of risk. As such, the pricing of our products reflects the risks our customers face. We believe the pricing of our products works to reward customers who take less risk with their health and safety. Some examples of our pricing rewards include lower rates for fewer speeding tickets, lower rates for building a home in a less wildfire-prone area, and lower rates for following the rules of the Federal Motor Carrier Safety Administration.
We often provide customers who have lower loss frequency with lower rates than customers with higher loss frequency and the same loss severity. Less driving means a lesser amount of greenhouse gas emissions and often lowers loss frequency. We also work to stay on top of emerging trends such as electric vehicle technology and next generation mobility. Progressive provides insurance for transportation network companies, which support alternative mobility concepts that reduce the reliance on personal vehicle ownership. We strive to match rates to behavior, which is why we look for ways to design our products to reward customers’ environmental stewardship and commitment to sustainable practices. In addition to our primary product pricing benefits, Progressive products have distinctive features that reward our customers’ good health, safety, and environmental stewardship behaviors are described in our 2022 CSR.
Additionally, we encourage greater awareness of the impact of climate change and severe weather in a variety of ways, including, but not limited to:
a) Informing policyholders who sign up for hail alerts about potential hailstorms near them based on their home address, giving them advanced notice to protect their vehicles. b) Producing public service announcements before, during, and after certain severe weather events for use by local radio stations and on social media to reach broader audiences with safety tips. c) Providing discounts in select areas to policyholders who take specific steps to better protect their home against weather-related losses. For example, we offer a discount to homeowner and business owner policyholders in certain areas who have homes or businesses that meet high building code enforcement construction. Discounts may even be available for older homes that have met the Insurance Institute for Business & Home Safety guidelines as a fortified hurricane designation.
Progressive also provides feedback to legislators and insurance departments on the effects of climate change through our participation in industry trade groups such as APCIA. Further, we validate the predictiveness of catastrophe models from various modeling firms against our own historical homeowners loss experience and provide feedback to these firms to help them improve their models.
In our actively managed fixed-income portfolio, we believe that, in addition to many traditional considerations of fixed-income investing, there is less risk in securities that score higher across various environmental, social, and governance factors. Therefore, we consider these assessments when evaluating investment decisions and will continue to do so in the future. We believe that we need to have a strong understanding of the long-term risks associated with fixed-income investments that score low on dimensions of corporate sustainability. For example, we believe that companies with strong, diverse management teams tend to perform better over the longer term. To further our understanding of long-term risk related to corporate sustainability, we have begun tracking our investment mix as it relates to ESG risk, where available.
Additionally, we continue to seek investments in facilities, equipment, and company vehicles that are increasingly energy and fuel-efficient to support better environmental outcomes while also reducing the costs that our customers ultimately bear. Each day we strive to take innovative steps to reduce our dependence on natural resources and operate efficiently in all aspects of our business. Our Real Estate and Corporate Services team manages our environmental stewardship efforts and guides the strategies we utilize to effectively manage our buildings, equipment, and fleet.
We are also working to reduce our carbon footprint through several means, including investing in renewable energy, exploring fuel-efficient vehicle alternatives, and continuing to focus on efficiency and conservation opportunities within our commercial real estate portfolio, an initiative started over 15 years ago. These efforts have included shifting from fluorescent to LED lighting in core campus locations. We also focus on calibrated automation efforts to optimize and conserve heating, cooling, and lighting and consider other ways to more efficiently operate our facilities given the reduced in-office presence due to the hybrid workforce model.. We also announced a goal of carbon neutrality by the end of 2025 for Scopes 1 and 2, which will help set the path to net-zero in the following decade.
In 2022, we completed construction on a 1.8-megawatt solar array at one of our main campus locations in Cleveland, Ohio, which went live in January 2023 and will reduce that location’s annual carbon emissions. In 2020, we entered into a 3-year renewable energy agreement with a wind farm in Pennsylvania, which was expected to reduce our electricity-related carbon emissions by nearly 31,000 metrics tons annually (70,000 MWh) beginning in 2021. To accommodate real estate portfolio changes and ongoing energy efficiency projects, during 2022, we amended our renewable energy purchase from the initial 70,000 MWh to align with consumption, providing for a purchase of approximately 55,000 MWh in 2022. |
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3. Disclose how the insurer identifies, assesses, and manages climate-related risks.
In disclosing how the insurer identifies, assesses, and manages climate-related risks, insurers should consider including the following:
• Describe how the insurer considers the impact of climate related risks on its underwriting portfolio, and how the company is managing its underwriting exposure with respect to physical, transition and liability risk.
• Describe any steps the insurer has taken to encourage policyholders to manage their potential physical and transition climate related risks, if applicable.
• Describe how the insurer has considered the impact of climate-related risks on its investment portfolio, including what investment classes have been considered.
A. Describe the insurers' processes for identifying and assessing climate-related risks.
In describing the insurers' processes for identifying and assessing climate-related risks, insurers should consider including the following:
• Discuss whether the process includes an assessment of financial implications and how frequently the process is completed.
B. Describe the insurer's processes for managing climate-related risks.
C. Describe how processes for identifying, assessing, and managing climate-related risks are integrated into the insurer's overall risk management.
In describing how processes for identifying, assessing, and managing climate-related risks are integrated into the insurer's overall risk management, insurers should consider including the following:
• Discuss whether climate-related risks are addressed through the insurer's general enterprise-risk management process or a separate process and how frequently the process is completed.
• Discuss the climate scenarios utilized by the insurer to analyze its underwriting risks, including which risk factors the scenarios consider, what types of scenarios are used, and what timeframes are considered.
• Discuss the climate scenarios utilized by the insurer to analyze risks on its investments, including which risk factors are utilized, what types of scenarios are used, and what timeframes are considered. |
| See the above responses to items 1 and 2.
Severe weather events can lead to increased loss expenses and disruption to physical assets, and can affect the cost and availability of reinsurance. To manage these risks, we measure changes in severe weather patterns, including frequency, severity, duration, and geographic location and scope to understand the potential business implications. We use catastrophe modeling tools to help estimate our exposure to weather-related losses and incorporate our findings in product design, policy pricing, and underwriting.
An important consideration for corporate responsibility at Progressive is how we choose to invest our capital. For our investment team, we have laid out goals of first, protecting our balance sheet in order to support our operating business and second, earning a strong risk-adjusted total return. Our investment portfolio is comprised of a passive replication strategy of the Russell 1000 for our equity exposure and an actively managed fixed income portfolio. In our actively managed fixed-income portfolio, we believe that, in addition to many traditional considerations of fixed-income investing, there is less risk in securities that score higher across various environmental, social, and governance factors. Therefore, we consider these assessments when evaluating investment decisions.
To further our understanding of long-term risk related to corporate sustainability, we recently began tracking our investment mix as it relates to ESG risk, where available. We use MSCI ESG Research, a globally recognized leader in corporate ESG evaluation, to monitor our ESG corporate bond portfolio risk. MSCI ESG Research ratings consider several aspects of ESG, including corporate governance, climate related environmental information, workforce and management diversity, and ESG controversies to provide a single score for an organization. Similarly, we recently began tracking our investments in environmentally friendly buildings in our commercial-mortgage-backed securities (CMBS) portfolio. To evaluate our investments, we have leveraged the U.S. Green Building Council’s LEED® green building program, which is the preeminent program for the design, construction, maintenance, and operations of high-performance green buildings. For additional details, see our 2022 CSR. |
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4. Disclose the metrics and targets used to assess and manage relevant collateralized risks and opportunities where such information is material.
In disclosing the metrics and targets used to assess and manage relevant collateralized risks and opportunities where such information is material, insurers should consider including the following:
• Discuss how the insurer uses catastrophe modeling to manage the climate-related risks to your business. Please specify for which climate-related risks the insurer uses catastrophe models to assess, if any.
A. Disclose the metrics used by the insurer to assess climate-related risks and opportunities in line with its strategy and risk management process.
In disclosing the metrics used by the insurer to assess climate-related risks and opportunities in line with its strategy and risk management process, insurers should consider including the following:
• In describing the metrics used by the insurer to assess and monitor climate risks, consider the amount of exposure to business lines, sectors, and geographies vulnerable to climate-related physical risks [answer in absolute amounts and percentages if possible], alignment with climate scenarios, [1 in 100 years probable maximum loss, Climate VaR, carbon intensity], and the amount of financed or underwritten carbon emissions.
B. Disclose Scope 1, Scope 2, and if appropriate, Scope 3 greenhouse gas (GHG) emissions, and the related risks.
C. Describe the targets used by the insurer to manage climate-related risks and opportunities and performance against targets. |
| See the above response to item 2.
Climate risk often manifests as weather risk and as part of our risk management practice, we run both internally built and third-party vendor catastrophe modeling tools to help estimate our exposure to weather risk by line of business, as well as on a per-occurrence and aggregate basis. Our modeling process generates exceedance probability curves, and we evaluate our modeled net retained weather risk against specific probable maximum loss (PML) return periods.
Our Scopes 1 and 2 GHG emission for 2022, to be attested by PWC (Scopes 1 and 2 location-based only) are as follows as of 12/31/2022: • Scope 1 GHG emissions = *31,896 tCO2e • Scope 2 GHG emissions (location-based) = *50,543 tCO2e • Scope 2 GHG emissions (market-based) = *16,553 tCO2e
*All numerical figures corresponding to 2022 data, including, without limitation, those relating to emissions data, are preliminary and reflect methodologies and assumptions believed to be reasonable and accurate. All numerical figures, including any underlying methodologies and assumptions, corresponding to 2022 data are subject to change as a result of, among other things, new information, subsequent developments and the pending finalization of the independent attestation of our greenhouse gas emissions and our 2022 Corporate Sustainability Report.
We surpassed our goal of achieving a 68% reduction in carbon emissions per million PIFs compared to 2008 by the original 2022 timeline goal in 2021. In 2022, we continued to expand the way we manage, track, and report our emissions.
We announced a goal of carbon neutrality by the end of 2025 for Scopes 1 and 2, which will help set the path to net-zero in the following decade. |
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