Some insurance companies have started to decline coverage for certain new fossil fuel projects, untangling themselves from the risks that come with propping up coal, oil and gas.
So climate activists were surprised and disappointed when three large reinsurance companies backed out of the United Nations’ Net-Zero Insurance Alliance (NZIA) within just three weeks of each other this spring.
Munich Re, Zurich Insurance Group and Hannover Re each announced they were quitting NZIA. In late March, Munich Re said that it was leaving the alliance because of antitrust concerns but that it was still committed to decarbonization. Zurich followed days later. Hannover Re didn’t give any reasons for its decision but said it is also still committed to its climate targets.
Climate campaigners fear that the antitrust risks cited by Munich Re may hamper insurers’ ability to tackle net-zero goals collectively. But they also believe that the concerns are likely without legal merit and that pressure from American anti-ESG politicians is to blame.
“Munich Re, Zurich and Hannover Re derive about one third of their revenues from the US market and are vulnerable to its political follies,” wrote Peter Bosshard, of the Insure Our Future campaign, in Environmental Finance. “Net Zero alliance members that are less exposed should call out the current anti-ESG campaign as the cynical ploy of the fossil fuel lobby which it is, rather than continuing to coddle their coal, oil and gas clients.”
Bosshard points out that competition regulators in the U.K. released guidance to ensure competition law won’t limit companies’ ability to pursue collective climate action. He urged regulators in the U.S., EU and elsewhere to issue similar clarifications.
“The weaponized antitrust campaign is a headache for some climate leaders and an easy excuse for continued inaction for climate laggards,” he adds. “Some financial institutions have argued that they can’t take individual action due to competitive pressures and now argue that they can’t take collective action due to antitrust concerns. They are making a strong case for stronger regulation.”
These moves followed a threat by big banks back in the fall to leave the Glasgow Financial Alliance for Net Zero (GFANZ), a group convened by former Bank of England (and Canada) governor Mark Carney. Facing this mutiny, GFANZ went on to announce it would not require its members to set rigorous science-based emission-reduction targets in line with the UN Race to Zero campaign.
When it comes to the insurance industry, climate campaigners can take some comfort in the fact that these companies have not deserted their net-zero commitments. Munich Re still expects to cut emissions related to its investment portfolio by 29% by the end of 2025 and achieve net-zero by 2050.
Munich Re was set to stop insuring new oil and gas projects in April. That’s something that might have seemed an unlikely outcome just a few years ago.
