NZIA withdrawals complicate net-zero underwriting decisions, says Marsh exec

Net-zero plans will increasingly inform risk selection

Risk managers need to be aware how their organisations’ impact on the environment and net-zero transition plans are viewed by insurers, who will increasingly factor this information into underwriting decisions, a Marsh exec said during a session at RIMS Riskworld conference in Atlanta. But she warned that recent withdrawals from the UN’s Net-Zero Insurance Alliance (NZIA) makes it harder to know exactly what path insurers will follow and what they will want to see from insureds.

A large cohort of insurers have committed to net-zero emissions in their underwriting portfolios by 2050, said Amy Barnes, head of climate and sustainability strategy at the broker.

Many have committed to net-zero emissions in their portfolio by the 2050 target and have said they will start reducing them significantly by 2030, Barnes said.

“Insurers who are part of the alliance have said they will reduce carbon emissions in their underwriting footprint by between 36% and 60% by 2030. That is really material,” she explained.

Insurers are going to start counting that information, Barnes said.

“Although you may have less input into how your business decarbonises, it’s a story that you need to know and need to understand because it will start to impact risk selection,” she told risk managers.

While initially companies in certain sectors such as oil and gas will be more impacted by insurers’ attention on climate transition plans, “there’s an opportunity” for all risk managers to “ensure they are engaged now”, she said.

However, the recent move by several insurers to pull out of the UN’s NZIA makes it more difficult to work out how insurers will implement their decarbonisation plans, she continued.

“Three weeks ago I could have told you the rules insurers were following. Now as insurers follow their own path there could be some real advantages to that, but it’s going to be far harder for us to communicate to you exactly what the expectations are,” Barnes warned.

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