Let’s delve into the origins and journey of the net zero insurance alliance (NZIA). It all started at UN conference on sustainable development in 2012 when UNEP FI (United Nations Environment Programme – Finance Initiative) principles for sustainable insurance (PSI) was launched. The PSI is a framework for ESG specifically focused for insurance industry. Hosts of initiatives are taken by PSI in this regard; like V20 led sustainable insurance facility, Nature positive insurance series, ESG guides for insurers, Net zero insurance alliance (NZIA) and others.
The Emergence & The Ambition: NZIA i.e. net zero insurance alliance is the group of the some of the leading insurers and re-insurers who are committed to transition insurance and reinsurance underwriting portfolios to net-zero greenhouse gas emissions by the year 2050.NZIA was established in 2021, and there were eight founding members of NZIA. These are AXA, Zurich Insurance, Allianz, Aviva, Munich Re, Generali, SCOR, and Swiss Re.
The Expansion & Exodus: From eight founding members to thirty members by 2023 was a significant journey. However, of late many insurers quit NZIA due to anti- ESG backlash. The number of members are now reduced to half. Last week three more insurers left NZIA, there are Beazley, Matmut and Samsung Fire & Marine Insurance. The remaining members as of June 6, 2023 are:
- Achmea
- American Steamship Owners Marine Insurance Company (Europe)
- ASR Nederland N.V.
- Aviva Plc
- Beneva
- Crédit Agricole Assurances
- Fidelis Insurance Holdings
- Generali Group
- ICEA LION Life Assurance Company
- Insurance Australia Group
- Intesa Sanpaolo Vita
- KB Insurance
- NN Group N.V.
- Shinhan Life Insurance
The Rise of Anti-ESG Campaign: The exodus doesn’t happen without any reason and that insurers don’t care about the sustainability is definitely not the reason. There is no change in the commitment of sustainability. Anti-ESG campaign believes that ESG violates the anti-trust law. For example, we have seen in the past that several insurers moved out of the coal projects due to environmental concerns. The idea was to support the ESG effort by not covering the industries that is known to contribute significantly in greenhouse gas emission. However, this move according to anti-ESG group is anti-competitive. There has been an increasing pressure from some groups on the intentions of climate alliances as it fear companies are “colluding” and chances of infringement of anti-trust law is high.
A letter raising concerns about the anti trust law was sent by 23 US state Attorney generals to NZIA. As per the letter it is stated that- “ Under our nation’s antitrust laws and their state equivalents, it is well-established that certain arrangements among business competitors are strictly forbidden because they are unfair or unreasonably harmful to competition. For example, “an agreement among competitors not to do business with targeted individuals or businesses may be an illegal boycott, especially if the group of competitors working together has market power.” Likewise, collective agreements to fix prices or “restrict production, sales, or output” are illegal. This restriction extends to agreements among competitors to issue uniform pricing policies, conditions of sale, production quotas, or otherwise limit the identity of their customers if those agreements will ultimately raise prices”
There is no precondition to join NZIA and it is left to the discretion of companies on they want to achieve objective. As per one of the commitment of NZIA “How to achieve such an outcome through a 1.5°C net-zero transition pathway will be left to my company’s discretion based on the latest available scientific knowledge, including the findings of the Intergovernmental Panel on Climate Change (IPCC).” Such commitments probably creating doubts on the intentions of NZIA. Lloyd’s, who was earlier a member, is no longer insuring new projects in coal but it is not the precondition to join NZIA.
Navigating Uncertainty and Building Resilience: The important point here is to think about the domino effect that it can have on other such alliances. Do we see anti-ESG forces getting stronger with the passage of time? Although this doesn’t mean that there will change in insurers’ sustainability commitment, but probably the way we deal with it might see some change. The future of Net Zero Insurance Alliance is uncertain, but the commitment for sustainability is strong!
