Why have so many major players quit the Net-Zero Insurance Alliance?

Several global firms including Lloyds of London, Axa and Allianz left the UN-backed Net-Zero Insurance Alliance (NZIA) last week. But are the departures really down to fears over anti-trust rules?

Why have so many major players quit the Net-Zero Insurance Alliance?

Pictured: Lloyds of London

Lloyds of London left the NZIA late last week, in tandem with Australian insurance giant QBE.

Also departing the Alliance last week were Swiss Re, Allianz, Scor, Mapfre, Sompo Holdings and Axa. The latter had been acting as chair of the Alliance, which was set up ahead of the COP26 climate summit in Scotland in late 2021.

This exodus followed on from the departure of at least 20 other small firms this year, plus founding NZIA member Munich Re in March. The firm stated at the time that its executive did not want to expose the company to “material anti-trust risks”.

This was the same reason given when Vanguard left the Glasgow Financial Alliance for Net-Zero, the Mark-Carney-convened alliance under which the NZIA operates, earlier this year. There had been reports that other US-based players were considering leaving in late 2022 and early 2023, also on antitrust grounds.

US lawmakers have raised concerns that the Alliance’s targets could violate federal antitrust laws, plus antitrust laws in some states, relating to competition.

However, there is also speculation that the insurers quit the NZIA as Republicans in the US continue their campaign against even voluntary environmental, social and governance (ESG) programmes in the private sector.

Reuters has reported that 99 anti-ESG bills were filed in the first four months of 2023, compared to 39 during the whole of 2022.

Some Republicans have argued that, by forcing clients to decarbonise, finance players are increasing product and service costs and risking energy insecurity. This is despite the fact that improving energy efficiency and shifting to clean energy can be a major cost saver, especially with wholesale oil and gas prices so high.

Reclaim Finance’s senior analyst Patrick McCullt has argued that “huge companies with their hordes of lawyers” should have seen anti-trust risks previously, meaning that “we must wonder whether their ditching of the alliance has more to do with fears of losing business in the US than real legal jeopardy”.

Every firm which has left has stated that it remains committed to reaching net-zero by 2050 or sooner, albeit using their own frameworks. But whether these frameworks are more or less credible than the NZIA’s is debateable. Lloyds of London, in particular, has faced continued controversy over whether its approach to the transition is credible.

The NZIA has stated that the exodus is attributable to “recent discussions in the US” and that any member firm “has the freedom to join or withdraw at any point in time and for any reason”.

“Regardless of the situation, UNEP reaffirms its conviction ever since it initiated, convened, and launched the NZIA—that in order to successfully tackle the climate emergency, there is a fundamental and urgent need for collaboration, not just individual action,” the statment adds.

Anti-ESG movement

It bears noting here that edie’s lifetime achievement award winner for 2023, Rachel Kyte, used her acceptance speech to hit back at the anti-ESG movement in the US.

She said: “System change does not come easy.

“As somebody who lives [in the US] and comes [from the UK], make no mistake – the origins of this attack in the populist right is just another manifestation of the fact that hell hath no fury like those used to wielding unchecked power scorned.

“Don’t make the mistake of thinking that just because populists on this side of the Atlantic used to have better green credentials, they won’t pander to this power.”

Related blog: A pivot from green euphoria to green fear in the financial sector

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