Zurich has become the latest insurer to withdraw from the Net-Zero Insurance Alliance, a UN-convened coalition of insurers and reinsurers who are committed to transitioning their portfolios to net zero by 2050.
Zurich would not comment on speculation that its withdrawal was linked to concern about the antitrust implications of such sustainability alliances.
A spokesperson told Reuters that the company instead wishes "to focus our resources to support our customers with their transition". That statement has been criticised by campaigners including Jennifer Buchli from Swiss organisation Campax, who says that it is “not credible… as long as the insurer doesn’t end their support for the expansion of oil and gas extraction themselves."
It becomes the second large insurer to leave the alliance, after Munich Re announced last week that it would “discontinue” its membership. In a statement, Munich Re’s CEO Joachim Wenning confirmed that the decision was linked to antitrust investigations.
“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 said.
What is the Net-Zero Insurance Alliance (NZIA)?
The Net-Zero Insurance Alliance (NZIA) is a UN-convened group of global insurers and reinsurers, who are all committed to transitioning their portfolios to net zero emissions by 2050. The target is consistent with the Paris Agreement on Climate Change, which states that world temperatures must not exceed 1.5°C above pre-industrial levels by the middle of the century – or else the chances of saving our planet from climate catastrophe become less likely.
“The insurance industry has an important role in the transition to a net-zero global economy,” the NZIA says on its website. The organisation describes itself as “a member-led group that supports its members as they work towards decarbonising their underwriting portfolios by individually setting science-based intermediate targets and reporting on their progress annually.”
Members include Allianz, Aviva, AXA, Swiss Re, and Generali – and, up until the past week, Munich Re and Zurich too.
None of the other members of the alliance have signalled the intention to quit.
Why are companies leaving the NZIA?
As Munich Re’s statement insinuates, the main reason behind the recent departures is linked to antitrust concerns being raised in the US Congress. A spokesperson for Zurich says their departure from the NZIA “will not change the group’s commitment to sustainability” – although it arguably sends the wrong message about collective climate action.
Last December, a group of House Republicans issued a pointed warning about firms collaborating on sustainability initiatives. “When companies agree to work together to punish disfavoured views or industries, or to otherwise advance ESG goals, this coordinated behaviour may violate antitrust laws and harm American consumers,” the group said.
Many will see the warnings as a thinly veiled attempt to strongarm American corporations into watering down environmental commitments.
Peter Bosshard, coordinator of the Insure Our Future campaign, says: "The NZIA has allowed itself to be immobilised by antitrust concerns from the start. With Munich Re and now Zurich leaving the alliance, insurers have an even bigger direct responsibility to align their businesses with a credible 1.5C pathway."
Ariel Le Bourdonnec from climate think tank Reclaim Finance is clear that antitrust legislation “must not prohibit collective efforts to combat the climate emergency”. And writing on LinkedIn, Tara Shirvani, a Senior Adviser for Sustainability and ESG at Swedish investment group EQT, called Zurich’s decision to withdraw from the NZIA “alarming”.
New report lays bare climate challenge
The recent departures from the Net-Zero Insurance Alliance coincide with a new report from Goldman Sachs Asset Management that lays bare the scale of the climate challenge to insurers. Goldman Sachs surveyed nearly 350 CIOs and CFOs across a full spectrum of insurance lines in the Americas, Europe and Asia.
Its findings show that insurance companies are increasingly concerned about the impact that climate change will have on their businesses. Nearly 40% of CIOs and CFOs interviewed say that the rising occurrence of freak weather events may force them to exit some lines of insurance, while 34% believe it will lead to increased premiums. Only 10% of respondents do not believe that climate change has any impact on their ability to insure for extreme weather, Goldman Sachs says.
Valentijn Van Nieuwenhuijzen, the company’s Global Head of Sustainability for Public Investing, believes there is still an appetite for climate action despite the latest developments. “As ESG is becoming a core component in the portfolio strategy of asset owners, investors are shifting towards more climate-aware and inclusive mandates,” Van Nieuwenhuijzen says.
“In 2023, we expect a further shift towards climate transition and a pivot towards more engagement rather than exclusionary strategies, with ESG factors becoming more refined and further integrated in the portfolio management approach of clients.”