Chubb Ltd. said Wednesday it will restrict coverage for oil and gas extraction projects unless policyholders reduce methane emissions, a major greenhouse gas.

The insurer will also stop underwriting projects in areas designated as protected by state, provincial or national governments, effective immediately.

Chubb’s decision comes amid continued pressure from activist investors and environmental groups for insurers to pull back from fossil fuel industries.

The new underwriting criteria require oil and gas producers to implement “evidence-based plans” to cut methane emissions to secure insurance coverage, Chubb said.

At a minimum, oil and gas policyholders must have programs for leak detection and repair and the elimination of non-emergency venting, Chubb said in a statement.

They must also adopt one or more measures proven to reduce emissions from flaring, the insurer said.

Policyholders will have a set period of time to develop a plan based on their individual risk characteristics, and Chubb will help them identify and adopt technologies that reduce methane emissions, the insurer said.

The company’s policy to no longer underwrite oil and gas extraction projects in government-protected conservation areas applies to nature reserves, wilderness areas, national parks and monuments, habitat or species management areas and protected landscapes and seascapes listed in the World Database on Protected Areas that do not allow for sustainable use.

By the end of 2023, it will develop and adopt standards for projects in areas with sustainable use of natural resources, and for oil and gas extraction projects in the Arctic, key biodiversity areas, mangrove forests and global peatlands that are not currently listed in the database, 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,” Evan G. Greenberg, Chubb chairman and CEO, said in the statement.

By not insuring energy projects in protected areas, Chubb is setting “clear guidelines to sustain biodiversity and protect nature,” Mr. Greenberg said.

Chubb restricted coverage for new coal-fired plants and limited investments in coal in 2019, and later applied the policy to oil sands, but has stopped short of committing to become a net-zero business.

“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,” Mr. Greenberg said.

Chubb launched a global business unit to provide coverage for climate-related risks earlier this year.