Breaking up the Alliance?

It has been a curious period for the Net-Zero Insurance Alliance (NZIA), after Zurich Insurance Group said it was withdrawing, becoming the second founding member to quit the climate group in less than a week.

The UN-convened Net-Zero Insurance Alliance (NZIA) is a group of some of the world’s leading insurers and reinsurers representing a significant percentage of world premium volume globally.

Zurich said that after establishing a standardised methodology for tracking and disclosing emissions, it wanted “to focus our resources to support our customers with their transition”.

According to Zurich, the decision  was not something it decided recently but is instead something the carrier has been considering for some time. The company also stressed that its sustainability ambitions pre-date its membership in the NZIA, and that withdrawing from the NZIA will not change the group’s commitment to sustainability.

The move by Zurich followed an announcement by Munich Re on 31 March to leave the group because of antitrust concerns associated with alliances among companies to tackle climate change.

Collective approach?

In a statement Munich Re CEO Joachim Wenning said: “In our view, the opportunities to pursue decarbonisation goals in a collective approach among insurers worldwide without exposing ourselves to material antitrust risks are so limited that it is more effective to pursue our climate ambition to reduce global warming individually.”

Wenning added that that Munich Re would stick to its climate goals outside of the NZIA, including a first step target of reducing greenhouse gas emissions related to its investment portfolio by 29% by the end of 2025, and thereafter successively brought down to net zero by 2050.

At the same time, the company plans to reduce thermal-coal-related exposure in its direct and facultative insurance business by 35% group-wide by 2025, before eliminating this exposure altogether by 2040.

Since 2018, Munich Re has ceased insuring new coal-fired plants, coal mines and since 2019 oil sand mines. “Our climate commitment is unwavering,” Wenning said. “We follow scientific recommendations. To date we are decarbonising even faster than what is required to reach net zero by 2050.”

In a statement the NZIA itself said: “The United Nations-convened Net-Zero Insurance Alliance was launched in July 2021 to speed up and scale up action to tackle climate change.”

“From the outset the NZIA has been clear that it and its members will comply with applicable laws, rules, and regulations, including antitrust. With this in mind, the NZIA has taken concrete actions to advance the net-zero insurance agenda globally and to provide its members with a framework they can use to make independent decisions to establish their own individual net-zero pathways.”

Campaigning pressure

Part of the Glasgow Financial Alliance for Net Zero (GFANZ) umbrella group of sectors pushing to decarbonise, NZIA members have faced growing pressure from campaigners to move faster in cutting emissions linked to their underwriting.

Possible concerns over antitrust issues at the heart of the issue here, as right-wing elements in the United States have called on regulators to provide more assurances to companies wanting to collaborate to tackle climate change. For example, Senator Marco Rubio and four other Republican senators wrote to 51 US law firms in November warning that “over the coming months and years, Congress will increasingly use its oversight powers to scrutinize the institutionalized antitrust violations being committed in the name of ESG, and refer those violations to the FTC and the Department of Justice”.

According to law firm Norton Rose Fulbright, the potential dangers here are clear: “Promoting sustainability is a top priority for companies in many sectors, as well as a key goal of governments around the world. Nonetheless, companies have traditionally been wary of pursuing cooperative approaches to achieve sustainability goals, and with good reason. Cooperation among competitors (outside narrow categories such as special purpose joint ventures and participation in standard-setting bodies) can trigger antitrust investigations that can last for years and potentially lead to large fines.”

Naturally, attention is now focused on the other existing members of the NZIA, and whether others will follow the lead of Munich Re and Zurich Insurance. So far, members are keeping their cards close to their chests, but it would not be surprising, especially given the intense scrutiny the NZIA is now under from the antitrust lobbyists in particular, if others do indeed follow.

The Net-Zero Insurance Alliance in brief

The Net-Zero Insurance Alliance (NZIA) is a coalition of leading (re)insurers that have committed to transitioning their underwriting portfolios to net-zero greenhouse gas emissions by 2050 or sooner. The alliance was launched in September 2021 and is an initiative of the United Nations Environment Programme’s Principles for Sustainable Insurance (PSI) and the United Nations Framework Convention on Climate Change’s Race to Zero Campaign.

The founding members of the NZIA include Allianz, AXA, Generali, Munich Re, Swiss Re, and Zurich Insurance Group. The alliance aims to accelerate the global transition to a net-zero emissions economy by leveraging the insurance industry’s expertise in risk management and underwriting.

NZIA members have committed to developing and implementing strategies to reduce the carbon footprint of their underwriting portfolios, including setting interim targets, measuring and disclosing their progress, and engaging with clients and other stakeholders to drive emissions reductions. The alliance also plans to work with governments, regulators, and other stakeholders to promote policies and practices that support the transition to a net-zero economy.

By aligning their underwriting portfolios with the goals of the Paris Agreement and the United Nations Framework Convention on Climate Change, the NZIA members aim to contribute to global efforts to limit the rise in global temperatures to 1.5 degrees Celsius above pre-industrial levels and reduce the risks associated with climate change.

According to Zurich, the decision  was not something it decided recently but is instead something the carrier has been considering for some time. The company also stressed that its sustainability ambitions pre-date its membership in the NZIA, and that withdrawing from the NZIA will not change the group’s commitment to sustainability.

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