Insurers and reinsurers who are members of the Net-Zero Insurance Alliance (NZIA), have received a letter from 23 lawyers in general raising potential legal concerns that may arise from their commitment to work with other insurers to advance an “activist climate agenda.”
NZIA was launched in 2021 at the G20 Climate Summit. NZIA members have committed to transition their underwriting portfolios to net-zero greenhouse gas (GHG) emissions by 2050. Current members include Swiss Re, Allianz and AXA.
The letter from the AGs requested documentation and answers to several questions related to potential legal concerns.
That letter follows previous letters the group of Republicans sent to asset and finance members of the climate group. They consider the environmental, social and governance (ESG) movement to be an illegal activism and agenda to be pushed to insurance consumers.
The concern centers on federal and state antitrust laws that prohibit insurers from changing the terms of the contract for reasons that are not reasonably related to the risk or cost of providing the insurance.
According to global business law firm Arnold & Porter Kaye Scholer LLP, companies can increase antitrust risks through their climate-driven initiatives, by not managing benchmarking goals, supply chains and vendors properly, and by engaging in questionable collaboration with competitors.
Utah Attorney General Sean D. Reyes, along with Louisiana Attorney General Jeff Landry, who are leading the effort, are particularly concerned about the requirements outlined in the first “Target-Setting Protocol” of the NZIA. Lawyers generally say that while the NZIA indicates that the protocol is not binding, it continues to provide clear instructions and requirements, some of which must be completed by the set deadlines.
They explained that their concerns stem from the potential harmful effect that the collaboration of insurers, in their quest to advance the climate agenda, could bring to the residents of their states.
“The push to force insurance companies and their clients to rapidly reduce their emissions leads not only to increased insurance costs, but also to higher gas prices and higher costs for products and services across the board, resulting in record-breaking inflation and fiscal hardship for the residents of our states.”
Outlining federal antitrust laws, legal regulators advise “that certain arrangements with business competitors are strictly prohibited because they are unfair or unreasonably harmful to competition” and may be considered an illegal boycott, when certain businesses are deliberately targeted because they are not complying with carbon reduction efforts.
An agreement to fix prices is also considered illegal, as is setting conditions in the terms of the insurance contract and may lead to a significant increase in prices and possibly inflation.
They cite NZIA’s more problematic “targets” because they “limit the identity of your customers and the scope of your overall business.”
They say that the “transition insurance” target would be an illegal restraint of trade because it places limits on the scope of your business by forcing your companies to increase the proportion of your business that consists of certain ” climate solutions.”
This is a problem, according to the letter, because it can lead to pushing insurers to a product where there is no need for it, while moving the focus away from products that are really needed in the market.
“The ESG movement has spread to every corner of the world’s financial and energy sectors, and unsuspecting Americans are paying the price,” said Utah Attorney General Sean D. Reyes. “Insurers have an obligation to protect their clients’ interests, not to advance a radical environmental agenda.”
Noting the apparent antitrust concerns, Munich Re, a founding member of the NZIA, announced it was suspending its membership of the climate alliance in late March 2023.
“In our view, the opportunities to pursue decarbonization goals in a collective approach to insurers around the world 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,” said Joachim Wenning, CEO of Munich Re.
Hannover Re and Zurich also left the coalition earlier this year.
Industry associations and NZIA member insurers contacted declined to comment on the letter from the AGs.
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