The success of the Republicans in triggering the dissolution of a coalition of insurance companies aimed at dealing with climate change is due to the fact that the US states are the main regulators of the industry. interviews with industry executives and former officials.
The UN-backed Net-Zero Insurance Alliance (NZIA), formed in 2019 to commit insurers to reducing greenhouse gas emissions in their underwriting portfolios to net-zero levels by 2050, lost 12 of 28 members since attorneys general from 23 Republican-controlled US states sent a letter to them on May 15. The letter requested information about the membership of insurers and threatened legal action on called anti-competitive behavior that drives up prices.
Republicans say that by withholding insurance from certain sectors, such as oil and gas, insurers are penalizing businesses and raising costs for companies and consumers.
Update: List of Insurers Exiting Climate Group Grows, Including Lloyd’s, Tokio Marine
Attorneys general have turned their attacks on environmental, social, and corporate governance (ESG) practices in the business world into a political rallying cry.
They also targeted other climate coalitions of financial companies, including the Net-Zero Banking Alliance and the Net Zero Asset Managers initiative, with threats and requests for information. However these groups do not suffer from many deviations, like the NZIA.
The reason, two insurance industry sources and a former regulator told Reuters, is that states are the regulators of insurers, unlike big banks and asset managers who primarily manage a federal level in the United States.
“Attorneys general have taken these characteristics of insurers to take advantage of them,” said Dave Jones, a former California insurance commissioner and now director of the Climate Risk Initiative at the University of California, Berkeley.
Jones added that he does not believe the attorney general’s accusations of anticompetitive behavior have merit.
Curtis Ravenel, a senior advisor at the United Nations-backed Glasgow Financial Alliance for Net Zero (GFANZ), an umbrella organization under which the NZIA sits, said insurers are less used to political pressure than other companies. in financial services such as banks.
“(State attorneys general) are taking advantage of a factor of fear given the authority they have,” Ravenel told Reuters. He added that he did not expect other climate alliances to suffer many departures despite pressure from Republicans, and urged the 16 insurance companies remaining in the NZIA to stay the course.
The alliance failed to persuade US insurers to join. Most of the insurers that left NZIA – including Spain’s Mapfre, France’s AXA, which heads the alliance, and Japan’s Tokio Marine and SOMPO – have substantial US businesses.
Alarmed by the departure of their peers, the remaining NZIA members are holding calls this week to decide their next step, according to people familiar with the matter.
They were alarmed by the spread of departures by insurers that lawyers assured they were not violating US antitrust laws, and by the exit last week of companies with little exposure to the United States, the people said.
Britain’s Aviva AV.L and Dutch cooperative Achmea are among the insurers that say they plan to stay. Some companies point to NZIA’s achievements in developing a standardized methodology for measuring and disclosing emissions from underwriting portfolios.
Of the 15 insurers who left the NZIA, only one explained its rationale publicly. Germany’s Munich Re MUVGn.DE, the first to quit on March 31, said it was withdrawing from the group to avoid “material antitrust risks” given how many members represented the market. of NZIA insurance. It does not mention US state attorneys.
Munich Re remains a member of another GFANZ group, the Net Zero Asset Owners Alliance (NZAOA), like Allianz, which quit the NZIA last week. Munich Re said the share of global assets held by NZAOA members means antitrust risks are “significantly lower.”
Set Targets
Insurance companies play an important role in the world’s transition from a higher carbon economy, as almost every project depends on their underwriting.
NZIA, like other GFANZ alliances, requires members to comply with the goal of the Paris Agreement to keep global temperature rise below 2 degrees Celsius and preferably to 1.5 degrees. They do this by setting targets for cutting emissions.
NZIA in January gave members six months to set targets. It is left to insurers to determine targets and decide how they will cut emissions.
Many insurers have also announced climate targets independently. French insurer SCOR, for example, announced limits on underwriting new gas fields and Arctic oil and gas exploration on the same day it left NZIA last week.
“How much did the insurers really get out of this?” said Jones, predicting that NZIA’s demise will have little impact on insurance companies’ climate efforts.
(Reporting by Tommy Reggiori Wilkes in London; additional reporting by Ross Kerber in Boston; editing by Greg Roumeliotis and Susan Fenton)
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