Carbon standards should help allay buyer fears over transition insurance

A soon-to-be-launched industry standard to measure insurance-associated greenhouse gas emissions will help address the concerns of risk managers about the transition to net-zero, according to two Switzerland-based insurers. 

Ferma complained in a recent whitepaper that insurers aren’t doing enough to help clients through the energy transition (see story on p8). In particular, Ferma called out a lack of sufficient risk transfer for green technology, and criticised insurers’ “strict adherence to backward-looking underwriting guidelines” and the use of exclusions for specific risks.

Insurers we spoke to refute the criticism, but add that work underway to develop an industry standard to measure greenhouse gas emissions associated with insurance policies will help drive progress. 

The  Partnership for Carbon Accounting Financials (PCAF), in collaboration with the UN-convened Net-Zero Insurance Alliance (NZIA), are set to launch a global standard to measure and disclose emissions attributable to insurance underwriting portfolios, also known as “insurance-associated emissions”, later this year. 

In parallel with the PCAF accounting standard, NZIA members are also working out a Target-Setting Protocol providing the guardrails for the transition.

NZIA members have committed to publish their first interim science-based targets six months after the publication of the NZIA Target-Setting Protocol, which is scheduled to be released in 2023.

The 29 (re)insurance members of the NZIA, which manage almost 14% of global gross written premiums, have promised to transition their underwriting portfolios to net zero by 2050. 

Significant step

The world’s first accounting standard for insurance-associated emissions, followed by the NZIA’s protocol, will be a significant step in addressing the concerns of corporate clients over the role insurance is paying in the transition to carbon neutrality, Mischa Repmann, a senior risk manager in the sustainability team at Swiss Re, which leads the NZIA metrics and targets workstream, told Commercial Risk Europe. 

“The NZIA was formed only 15 months ago, and the PCAF is about to publish an accounting standard by year-end, so this is a significant step forward. Once we then also agree on a framework to set targets, it will alleviate the perception that insurance might be lagging what is happening in the real economy,” he said.

“If you can’t measure [emissions], you can’t manage [your portfolio]. But once you have an accounting standard and the Target-Setting Protocol, you have a good starting point. As an industry, we want comparability, so that when we say net zero, we all mean the same thing,” said Repmann.  

Gabrielle Durisch, global head of sustainability, commercial insurance at Zurich Insurance, also believes the NZIA workstreams should address some of the concerns of buyers, and reduce the need for broad-brush exclusion for carbon-intensive activities, especially where companies already have transition commitments in place.

“Being a member of the NZIA is important as it enables rational debate with peers, and helps us develop the reporting methodology that allows us to set emissions reduction targets in underwriting, and provide the reporting mechanism that enables us to explain how our book is developing. Once you have that in place, there is no longer a need for exclusion policies, because you can demonstrate that you are reducing the emissions associated with your book,” she said.  

Once published, the PCAF carbon accounting standard and the NZIA Target-Setting Protocol can be used by insurers to establish their underwriting strategies and criteria.

“Once you know the carbon footprint of an insurance portfolio, you can start to steer emissions – you can implement measures to achieve your target,” said Repmann, who heads the NZIA’s Target-Setting Protocol work.

The PCAF’s carbon accounting standard, or carbon footprinting standard, will develop over time. “We have chosen the scope where we can comfortably start applying formulas and methodologies for attributing emissions, and we will produce further versions of the standard to step-by-step increase the coverage across an insurance and reinsurance book,” Repmann said.


Insurers will need to communicate their position clearly to customers, Durisch stressed. “Our approach is to be transparent about what we are working on and our commitments. We recently had a two-day workshop with a customer, with an exchange of knowledge. They shared their transition plans and commitments, and we were quite open about our sustainability commitments, especially what we would expect around the NZIA. They might not have liked everything they heard, but they saw the value in transparency, and our commitment to continue working together,” she said.  

If businesses do not have publicly available emissions targets in place, they should expect insurers to want to know what their plans are, said Durisch. “If their transition plans and activities are transparent and publicly available, it should be more straightforward. But if they do not have plans in place, they should expect more questions around transition and how they are working towards that,” she said.

Insurers will need more data on the transition but they are conscious that customers will not want to be deluged by different requests from multiple insurers, other stakeholders and suppliers, said Durisch. “We are trying to figure out how to make this process easier, such as using a standard format when engaging with customers, or leveraging the broker relationship to access the data we need. We do not want to bombard customers with information requests,” she said. 

“It is our responsibility as an insurer to ensure our underwriters know why we are asking for certain information and what we will do with the information, and make it as easy as possible for all involved,” Durisch added.


The NZIA framework should get good traction in the commercial insurance market because most of the world’s largest global insurers and reinsurers are members. However, the PCAF framework is not compulsory. It will be up to individual insurers to decide if or how they implement the accounting standard. 

“All NZIA members have committed to using the Target-Setting Protocol. Within six months of publication of the Target-Setting Protocol, the members have agreed to publish their targets publicly. All 29 members are bound to that. The PCAF accounting standard, however, is optional and NZIA members are not bound to use it,” said Repmann.

He expects other insurers will join the NZIA once the framework gains wider acceptance. “Once the framework is implemented, the industry will see its value and stakeholders will start to ask for them to be used. I would then expect to see an increase in NZIA membership, and it should take off from there,” he said.

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