NZIA members ‘monitoring’ developments as third insurer departs

Two key members of the Net-Zero Insurance Alliance (NZIA) have told Commercial Risk that they are “monitoring” developments as a third (re)insurer leaves the UN-convened body amid industry fears of antitrust risks.

Hannover Re has became the latest insurance group to leave the NZIA, following the departure of NZIA-founding members Munich Re and Zurich Insurance in early April. While the three companies have not given detailed explanations of their decisions, insurers’ net-zero commitments and activities are coming under increasing scrutiny in the US with regards to antitrust laws.

The NZIA was formed in 2021 by eight insurers – Allianz, Aviva, AXA, Generali, Munich Re, SCOR, Swiss Re and Zurich – to develop an accounting framework to measure insurance-related greenhouse gas emissions and help set targets. It has since been joined by other insurers, including Lloyd’s, MAPFRE, QBE, Beazley and Fidelis, as well as Japanese insurers MS&AD, Sompo and Tokio Marine.

Following the recent withdrawals, NZIA founding members Allianz and Swiss Re say they are now monitoring the situation.

“We are monitoring developments. In general, we believe in the power of effective partnerships to drive decarbonisation. The UN-convened alliances are considered as world-leading in their efforts to mitigate climate change and to build climate resilience,” Allianz told Commercial Risk in a statement this week. “We continue to chair the UN-convened Net Zero Asset Owner Alliance, and continue to work within the Asset Manager Initiative,” it added.

A Swiss Re spokesperson said: “Our sustainability strategy remains unchanged and our commitment to the Paris Agreement and net zero is unwavering. We take note of the current developments in relation to the NZIA and are monitoring the situation.”

Zurich and Hannover Re did not comment on the reasons for their decisions, saying only that they remain committed to their net-zero ambitions. “After careful consideration, Hannover Re has decided to leave the NZIA. Regardless of this, Hannover Re remains committed to its sustainability strategy, the associated goals and its support for the Paris Agreement, and aims to achieve full climate neutrality by 2050 at the latest,” it said.

Zurich said that after establishing a standardised methodology for measuring and disclosing insurance-related greenhouse gas (GHG) emissions, it wants to “focus our resources to support our customers with their transition”.

Munich Re, however, did cite antitrust risks as a reason to withdraw from the NZIA, adding that it is sticking to “ambitious” climate targets and will remain a member of the NZAOA, a similar UN-convened body for investors.

“We understand that the announcement to discontinue the NZIA membership might seem unexpected from an external perspective, but of course we continuously weigh our participation in external organisations and their ongoing alignment with our internal evaluation and risk assessment,” Munich Re said in a comment sent to Commercial Risk.

“We can only speak for ourselves, and in our view Munich Re’s 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,” it said.

“As the combined market share of the alliance members is much lower in the NZAOA, also the antitrust risk is significantly lower in our view for Munich Re’s contribution as an asset owner. We remain committed to our membership in the NZAOA,” it added.

Commenting on the departures of Munich Re and Swiss Re, Moody’s said that a weakening of the NZIA is “credit negative” for the P&C insurance sector, as it will result in a “less consistent and transparent approach to decarbonising underwriting portfolios, and hamper the ability of creditors and other stakeholders to understand the changes to risk appetite of individual insurers”.

“While it is the case that insurers will continue to work together on methodologies and tools for measuring emissions, a process that already takes place outside of the alliance, the NZIA has been key in driving transparency and consistency of targets and timelines… These exits bring into focus the legal and competitive obstacles that insurers face in coordinating their response to decarbonisation, which could impede insurers’ ability to manage risk related to the carbon intensity of their underwriting portfolios,” it said in a briefing paper.

Moody’s noted growing disquiet in the US over perceived potential anticompetitive activities of insurers when it came to meeting their net-zero targets. A group of insurers, for example, coordinating to deny insurance coverage to companies in certain carbon intensive sectors could be deemed anticompetitive and in violation of antitrust laws because it could lead to higher insurance prices for these companies as a result of restricted competition for their business, Moody’s said.

In October 2022, the Attorneys General of 19 US states launched an antitrust investigation into six US banks that are members of the Net-Zero Banking Alliance. Just this month, a group of Republican state Attorneys General published an open letter to more than 50 of the largest asset managers in the US that cast doubt on their compliance with antitrust laws.

The same letter mentioned insurers, and stated: “Several insurers also face climate proposals that push for unlawful alterations of underwriting activities in order to achieve the ESG goal of aligning insurance underwriting with net zero by 2050”.

In a statement on 12 April, NZIA reiterated that its framework and activities comply with antitrust laws. “From the outset the NZIA has been clear that it and its members will comply with applicable laws, rules, and regulations, including antitrust… the NZIA has taken concrete actions to advance the net-zero insurance agenda globally and to provide its members with a framework they can use to make independent decisions to establish their own individual net-zero pathways,” NZIA said.