Net-Zero Insurance Alliance reveals ground-breaking target setting scheme

The Net-Zero Insurance Alliance (NZIA) has used the annual World Economic Forum meeting in Davos to unveil the Alliance’s first Target-Setting Protocol, designed to enable members to independently set science-based, targets for their underwriting portfolios.

The move was described as “ground-breaking” by Axa’s group chief risk officer and chair of the NZIA.

“As risk managers, insurers and investors, the insurance industry has an important role to play in the transition to a net-zero emissions global economy by supporting their clients in taking concrete action to achieve net zero,” the alliance said in a statement.

It added version 1.0 of the NZIA Target-Setting Protocol will enable NZIA members to begin to independently set science-based, intermediate targets for their respective insurance and reinsurance underwriting portfolios in line with a net-zero transition pathway consistent with a maximum temperature rise of 1.5°C above pre-industrial levels by 2100. With the launch of the Protocol, existing NZIA members are required to set and disclose their initial target(s) by 31 July 2023.

“The NZIA’s first Target-Setting Protocol is a landmark breakthrough. For the first time ever, insurance and reinsurance companies among the largest globally have built a framework and measurement tools to assess the impact of their activities on climate change. The NZIA’s Target-Setting Protocol will serve as a catalyst to set unprecedented and ambitious targets towards net zero,” said Renaud Guidée, NZIA chair and group chief risk officer at AXA.

The announcement comes 18 months after the Alliance’s launch at the 2021 G20 Climate Summit in Venice by eight of the world’s leading insurers and reinsurers. Since then, the Alliance has grown to 29 insurers and reinsurers representing about 15% of world premium volume globally.

The protocol has been created to build on the launch of the first-ever global accounting standard to measure greenhouse gas emissions associated with insurance underwriting portfolios (“insurance-associated emissions”) developed by the Partnership for Carbon Accounting Financials (PCAF) in collaboration with the NZIA.

“Climate change is one of the biggest challenges we face as a global society and re/insurers play their part in the transition to a low carbon economy. Setting targets to decarbonise re/insurance portfolios is therefore a crucial step forward, serving as a north star on the path to net zero,” said Thierry Léger, group chief underwriting officer, Swiss Re, whose organisation leads the NZIA Target-Setting Working Group.

The Protocol outlines five target types within three target categories (i.e., two types within the emissions reduction category, two types within the engagement category, and one for the re/insuring the transition category). Existing NZIA members will be required to set at least one of the five target types by 31 July 2023, and at least one target type in each of the three target categories by 31 July 2024. Those joining the Alliance after January 2023 will have six (6) months to set their first target and one year after that to set a target type in each of the three target categories.

“The launch of the Protocol signals the move from commitment to implementation. Now is the time for insurers to set ambitious and credible science-based decarbonisation targets for their respective insurance portfolios and support a just transition to a net-zero emissions economy to avert climate catastrophe and ensure a sustainable future,” said Butch Bacani, who leads UNEP’s Principles for Sustainable Insurance Initiative, which created the NZIA last year.