The news that seven insurers have pledged to create Net Zero Insurance Alliance, (NZIA) has been met with a call for the seven to walk away from fossil fuel risk if they are serious about the alliance’s aims.

The seven, AXA (NZIA Chair), Allianz, Aviva, Munich Re, SCOR, Swiss Re and Zurich Insurance Group released a statement that said all believe that the global insurance and reinsurance industry can play a key role in accelerating the transition to a resilient, net-zero emissions economy, in line with the 1.5°C target of the Paris Agreement on Climate Change.

“We insurers and reinsurers can deliver impact on climate not only through our investment decisions but also through our underwriting actions. The insurance and reinsurance coverage we provide to our customers can support the transition to a greener economy. We believe it is our role to both serve our clients and preserve our planet,” said Renaud Guidée, Chair of the NZIA and Group Chief Risk Officer of AXA. “Achieving the climate neutrality ambition is a matter of long-term sustainability, yet it comes with a sense of urgency – this is why we intend to join the Race to Zero. In the run-up to COP26, the UN-convened Net-Zero Insurance Alliance, being established by seven leading insurers and reinsurers with global operations, is open to on-board additional members across the world.”

“These seven global insurers and reinsurers represent the ‘G7’ of the insurance industry in terms of net-zero ambition,” said Butch Bacani, who leads the PSI at the UN Environment Programme. “By advancing the net-zero agenda across both their insurance and investment activities, these insurers are demonstrating cognitive consonance, accelerating the race to zero, and setting the net-zero bar for the rest of the global insurance industry.”

However, climate groups say talk is cheap and the long standing campaign to end the coverage of fossils fuels amongst a range of steps.

The Insure Our Future network has published its annual letter to insurance and reinsurance company and called for a range of steps to be taken by the NZIA.

“The climate crisis is escalating,” the letter stated. “In 2020 the planet experienced the warmest year on record (tied with 2016) as well as a record-breaking Atlantic hurricane season, a record number of climate disasters across Asia, unprecedented wildfires in Australia, California and Siberia and record floods in the Sahel and other parts of the world. Globally, natural disasters created losses of US$ 210 billion last year, $82 billion of which were insured.

“To date, governments have proven unable to make the changes which climate science requires to address this escalating crisis. According to the IPCC’s 1.5°C report, CO2 emissions need to decline by about 45 per cent from 2010 to 2030 to be consistent with global emission pathways to the 1.5°C goal (with no or limited overshoot). Yet the UNFCCC recently concluded that the new and updated nationally determined contributions which governments have prepared for COP26 will only reduce CO2 emissions by 0.5 percent by 2030 compared with 2010.”

The letter warned the combustion of fossil fuels continues to be the primary cause of disastrous climate change.

“The latest Production Gap report, which UNEP and other institutions published in December 2020, found that the world needs to decrease fossil fuel production by approximately 6% per year between 2020 and 2030 –11% for coal, 4% for oil and 3% for gas respectively –to follow a 1.5°C-consistent pathway. Yet in contrast to this scientific conclusion governments plan to increase fossil fuel production by 2% per year,” it added.

“As society’s professional risk managers, insurance companies have access to the latest climate science. They warned about the risks of climate change as early as 1973 –almost 50 years ago. Today they must fully embrace the necessary transition from fossil fuels to renewable energy as risk managers, investors and corporate citizens.”

Insure our Future said the new group should commit to deliver on the following steps:

• Immediately cease insuring new and expanded coal, oil, and gas projects.
• Immediately cease insuring coal companies, unless they have a coal exit plan that commits to close all coal-related assets by 2030 in EU/OECD countries and by 2040 globally.
• Phase out, in line with a 1.5ºC pathway, insurance for oil and gas companies.
• Divest all assets, including assets managed for third parties, from coal, oil, and gas companies that are not aligned with a 1.5ºC pathway. Any company that is building new coal, oil, or gas expansion projects is not aligned with 1.5ºC.
• Bring stewardship activities, membership of trade associations and public positions as a shareholder and corporate citizen in line with a 1.5ºC pathway in a transparent way.
• Establish robust due diligence and verification mechanisms to ensure clients fully respect and observe all human rights, including the right to Free, Prior and Informed Consent (FPIC) as articulated in the UN Declaration on the Rights of Indigenous Peoples.

Lindsay Keenan, European Coordinator, Insure Our Future, added: “The establishment of the Net Zero Insurance Alliance offers an opportunity for the insurance industry to align its business with a pathway to 1.5C. In order to be credible, the members of the new alliance need to back up their long-term commitments with an immediate shift away from fossil fuel expansion projects, including new oil and gas, and take coal out of their treaty reinsurance business.”

“These seven global insurers and reinsurers represent the ‘G7’ of the insurance industry in terms of net-zero ambition,” said Butch Bacani, who leads the PSI at the UN Environment Programme. “By advancing the net-zero agenda across both their insurance and investment activities, these insurers are demonstrating cognitive consonance, accelerating the race to zero, and setting the net-zero bar for the rest of the global insurance industry.”