Five major insurers quit industry net zero initiative

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Five major insurers quit industry net zero initiative

26 May 2023 Clean energy investing 0

Three of Europe’s biggest insurers and large Japanese and Australian insurers have quit the Net-Zero Insurance Alliance as growing US political pressure and legal fears plunge the climate initiative into crisis.

Axa, the group’s former chair, Allianz, and Scor, as well as Japan’s Sompo Holdings, said on Thursday that they were leaving the NZIA, which is one part of Mark Carney’s umbrella group Glasgow Financial Alliance for Net Zero, created by the former Bank of England governor ahead of the UN climate summit held in Glasgow in 2021.

The Australian insurer QBE said on Friday it had also left the climate club, after joining in February 2022.

The departures bring the total number of large insurers which have left the NZIA to at least nine, severely curbing its collective power and posing a question over its future. Its website listed 22 members on Friday.

Gfanz and its members have come under attack from Republican politicians in the US, who are targeting collective climate action groups they perceive to be unfairly hitting the oil and gas industry.

On Friday, Gfanz said the “political attacks” were interfering with insurers’ “efforts to price climate risk, which will harm policyholders, main street investors and local economies”. It pledged to continue to support insurers’ efforts to develop transition plans.

Other than a high-profile departure from the US asset manager Vanguard in December, Gfanz’s asset management, banking and asset owner subgroups have mostly weathered the storm.

However, its insurance arm, the NZIA, has struggled to gain members outside of Europe and Asia. And, earlier this month, its members were sent a letter from US state attorneys-general raising “serious concerns” over whether the alliance complied with antitrust laws.

Munich Re, one of the world’s biggest reinsurers and a founding member of the NZIA, quit the group in late March. Its chief executive said he did not want to expose the group to “material antitrust risks”.

Zurich, an insurance group, and Hannover Re, another reinsurer, left in April. Reinsurer Swiss Re also left earlier this week.

“As the Net-Zero Insurance Alliance disintegrates before our eyes, we must ask why these huge companies with their hordes of lawyers did not see antitrust issues as a major obstacle when they founded the alliance. And we must wonder whether their ditching of the alliance has more to do with fears of losing business in the US than real legal jeopardy,” said Patrick McCully, senior analyst at the non-profit Reclaim Finance.

Two people briefed on the decisions by insurers to quit said they did not think that the initiative, which has considered competition issues from the start, would lose a legal fight, but feared the distraction it would cause. “This is a battle that insurers can spare themselves,” said one.

European governments have also privately expressed concerns that insurers in the NZIA could cause the cost of energy to rise if they collectively stopped underwriting fossil fuels, according to a person close to the leadership team at the Glasgow Financial Alliance for Net Zero.

“For national security [reasons] they are worried about keeping the lights on,” the person said.

France’s Axa said on Thursday that it would “continue its individual sustainability journey, as an insurer, an investor and a responsible company”. 

Allianz said it remained “fully committed” to a parallel organisation for asset owners.

Reinsurer Scor’s departure was announced by its new chief executive at Thursday’s annual meeting, alongside a set of new climate pledges.

The Japanese insurer Sompo, which joined the alliance last June, said it would continue to pursue its climate goals “as vigorously” outside the group.

Insurers have come under increasing pressure from activist investors and campaigners in recent years to cut their coverage of the most polluting sectors.

The NZIA was one attempt to corral insurers around the goal of reducing the carbon footprint of their underwriting, but critics highlighted the lack of US members and the fact that a ban on insuring coal was not a condition of joining.

The challenges faced by the NZIA demonstrate the need for greater intervention by governments, argued Peter Bosshard, co-ordinator of the Insure our Future advocacy group: “If the insurers can no longer act collectively, this is a strong reason for regulation.”

Lloyd’s of London, the City’s speciality insurance market, which was subject to yet another protest by climate activists at its annual meeting on Thursday, said it remained an NZIA member. It later added that it was reviewing the letter sent by US state attorneys-general and noted that it was “for the individual businesses that operate in the Lloyd’s market to make their own business and strategy decisions”.

The United Nations Environment Programme Finance Initiative, which convenes the NZIA, did not immediately respond to a request for comment on the latest departures, but has previously noted that it is “a voluntary initiative”.

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