Zurich transition plan aims for 20% cut in insurance emissions by 2030

Zurich Insurance is targeting a 20% cut in emissions associated with its insurance business by 2030 under a transition plan published Wednesday. The new plan calls for focus on both decarbonisation and adaptation, with Zurich promising to help customers through the transition.

The plan will see Zurich engage with its large corporate customers over the coming years to assess their transition plans. The company will also expand its risk consulting business, Zurich Resilience Solutions, and develop insurance coverages for transition risks and technologies.

Zurich’s Climate Transition Plan sets out for the first time how the insurer aims to achieve its goal of becoming a net-zero business by 2050, Linda Freiner, chief sustainability officer for Zurich Insurance, told Commercial Risk.

The plan is based on four “mutually reinforcing aims”: Enabling the transition; helping make society more resilient; advocating public policy; and decarbonising its own operations and supply chain, she explained.

“This is our first view of how we want to achieve the net-zero ambition we set out in 2019, to become a net-zero business across insurance, investments and our own operations. We want to address the dual imperative of climate change – both decarbonisation of the economy and resilience and adaptation. The insurance industry we think can really contribute to the investments and the priority that the transition needs,” she said.

Zurich is targeting a 20% reduction in insurance-associated emissions from its large corporate customer portfolio by 2030, starting from a 2022 baseline measured using the Partnership for Carbon Accounting Financials methodology. According to Freiner, the reduction would largely follow the decarbonisation efforts of its large corporate clients across a wide range of industries.

Zurich had previously said it will no longer underwrite new single site policies for upstream oil and gas exploration and development projects, including production. It also expects oil and gas producers to have “credible transition plans aligned to achieving net zero by 2050, with interim targets and clear measurable commitments” in place by 2030.

According to the plan, Zurich will engage with 450 of its largest insurance customers that contribute most heavily to its portfolio emissions between now and 2030, starting with 65 customers over the next 12 months. The engagement process will assess an organisation’s alignment with the Paris Agreement and net-zero targets, net-zero plans and investments. Zurich will measure progress against any targets.

“This is now an engagement topic with our customers, to really understand how we can support them in the transition, and how they plan to lower their emissions. The easy way would be for us to step away from companies, but what we are trying to achieve is to step up and be a partner in their transition,” said Freiner.

“We will first build an understanding and evaluate clients’ plans and then we will prioritise risk engineering support and capacity for those customers that are actively transitioning. We also said in April that we expect oil and gas customers to have transition plans in place by 2030, and if we don’t see real progress in managing transitions risks, we would consider exiting customers, as a last resort,” she said.

A big part of supporting clients will require insurers to underwrite transition risks and green technologies.

“We see our role as an insurance company to engage with customers and the companies we invest in to really understand what their transition plans look like, what investments they will make into new technologies and what their transition pathway looks like. That will also help us understand what insurance and investment they will need for the transition, and to scale climate solutions,” said Freiner.

“This is for us also a learning process. There are new technologies we do not know well enough yet that we will have to insure in the future. It will be a long-term engagement and something that we started in 2017 with our first position on thermal coal – now it is really about looking further into the future,” she said.

In its transition plan, Zurich said it aims to “profitably expand” its range of sustainable products and services to support renewable infrastructure and key net-zero technologies, including nascent technologies like green hydrogen and carbon capture and storage. In July, Zurich announced it partnered with broker Aon to create a clean hydrogen insurance facility.

“Keeping pace with the scale of insurance needed for the transition presents its own challenges and will place new pressures on the industry’s underwriting capacity. Analysis suggests a significant net expansion of insurance capacity will be needed, particularly through to 2030,” Zurich said in its transition plan.

According to Freiner, Zurich will also continue to advance its understanding of climate resilience and integrate this into its core underwriting processes. It also expects to grow its risk advisory business, Zurich Resilience Solutions, which saw climate-related revenues increase 22% between 2022 and 2023.

“We want to grow our advisory business Zurich Resilience Solutions. We see there is a need, both on the public and commercial customers side,” said Freiner.

Zurich’s transition plan and its ability to achieve its net-zero ambition are dependent on several factors outside the insurer’s control, such as the implementation of public policy and green technology, explained Freiner.

“We are upfront about the fact that it will be challenging to achieve this ambition without enough public policy and regulation supporting an economy-wide transition. So we will be active in our advocacy and public policy engagement to support the transition. Just becoming a net-zero Zurich is not enough for us – we want to see that real-world transition,” she said.

Freiner also admits that the work of assessing insurance-associated emissions is a work in progress.

“We are approaching those companies that contribute most heavily to our insurance-associated emissions, using the insurance-associated emissions metric – it’s not a perfect metric but it is the best that is currently available. Today we only have data for the largest customers in our portfolio – we only have Scope 1 and Scope 2 data, and we only have that mainly for publicly listed companies. That is something we need to evolve, and I suspect it is something we do not address enough as an industry,” she said.