Eight of the world’s largest insurance and reinsurance companies have launched the Net-Zero Insurance Alliance (NZIA) at the G20 Climate Summit in Venice yesterday, committing to transition their underwriting portfolios to net-zero greenhouse gas (GHG) emissions by 2050.
The United Nations Environment Programme Finance Initiative (UNEP FI) called it a “historic commitment” by the insurers and reinsurers to “play their part in accelerating the transition to a net-zero emissions economy, as required by the Paris Agreement.”
The Net-Zero Insurance Alliance (NZIA), which has been convened by UNEP Finance Initiative’s Principles for Sustainable Insurance (PSI), is launched by the eight global insurance and reinsurance players, which are AXA (NZIA Chair), Allianz, Aviva, Generali, Munich Re, SCOR, Swiss Re and Zurich Insurance Group.
The move to transition to net zero underwriting portfolios is a step beyond the investment focused commitments more frequently seen, but how they get there is up to each company as they will set their own route to this objective.
Net-zero greenhouse gas (GHG) emissions by 2050 is said to be consistent with a maximum temperature rise of 1.5°C above pre-industrial levels by 2100, according to UNEP.
As members of the the UN-convened Net-Zero Asset Owner Alliance (NZAOA) ,established in 2019, all eight of the re/insurers founding the NZIA are on a science-based path to 2025 decarbonisation targets for their investment portfolios as well, which is said to be in-line with a net-zero transition pathway.
Each of the re/insurers will now individually set science-based intermediate targets every five years and also report on their progress publicly and annually, while they will also advocate for and engage in governmental policies for a science-based and socially just transition of economic sectors to net zero, the launch announcement said.
“Through the Net-Zero Asset Owner Alliance launched in 2019, insurers and reinsurers are already working towards decarbonising their investment portfolios in line with climate science and the Paris Agreement,” explained Thomas Buberl, CEO of the AXA Group, which chairs the NZIA. “With this new Net-Zero Insurance Alliance, we are raising our climate ambition further by using our underwriting, claims, and risk management practices to help ensure and enable the transition to a resilient net-zero global economy.”
“For generations, the insurance industry has served as society’s early warning system and risk manager by understanding, reducing, pricing and carrying risk. As we approach COP26 in Glasgow, the risks posed by global heating are escalating and the world is a long way from meeting the promises made when the Paris Climate Agreement was forged nearly six years ago,” added Inger Andersen, Executive Director of the UN Environment Programme (UNEP). “Along with governments, the insurance industry and wider financial sector have the power and responsibility to drive progress towards a net-zero economy and a sustainable future for all. Guided by science, I am pleased to see leading insurers embed the net-zero ambition in their core insurance business. I urge the rest of the global insurance industry to respond to the climate emergency and urgently follow the example set by the founding members of this pioneering alliance.”
“Having a global financial system where every professional decision takes climate change into account requires harnessing the full role of the insurance industry as risk managers, insurers and investors for climate action,” Mark Carney, the UN Special Envoy on Climate Action & Finance, the UK Prime Minister’s Finance Adviser for COP26, and Chair of the Glasgow Financial Alliance for Net Zero also said. “By committing to join the gold standard alliance for net zero, the Net-Zero Insurance Alliance will ultimately make underwriting contingent on underlying companies having credible net-zero transition strategies.”
The launch re/insurers that are part of the NZIA have committed to the following:
Concrete approaches that they can take to achieve their net-zero ambition on an individual basis. These include setting underwriting criteria and guidelines for the most GHG-intensive activities within their underwriting portfolios, engaging with clients and potential clients with the most GHG-intensive activities on their decarbonisation strategies and net-zero transition pathways, developing and offering insurance and reinsurance solutions for low-emission and zero-emission technologies and nature-based solutions that absorb GHG emissions, improving claims management in an environmentally sustainable manner, and integrating net-zero and decarbonisation-related risk criteria into their risk management frameworks.
Now, the NZIA membership is expected to expand, to include insurers, reinsurers, brokers and insurance market bodies from around the world.
The leaders of the founding member companies all commented on the announcement, which is seen as an important step in setting the entire insurance and reinsurance industry on a path towards net-zero.
For these large, global players to shift their underwriting portfolios to net-zero will have a profound effect throughout the industry and especially as more industry participants come on-board.
It means their counterparties will also need to embrace a transition to net-zero and when the largest players drive an initiative like this, it should have a knock-on effect across insurance and reinsurance.
“As a founding member of this strong network, Allianz strives to accelerate the urgently needed transformation to a 1.5-degree economy. We are pleased to bring in our expertise and join forces to extend the net-zero ambition to the entire insurance market,” Oliver Bäte, CEO, Allianz SE.
“Our whole economy depends on insurance, so a net-zero insurance industry is a fundamental part of helping shift the economy towards protecting the planet. Aviva is proud to be a founding member of this Alliance as part of our own ambition to be net zero by 2040. It takes partnerships like these to tackle the big challenges facing us to build a sustainable future for everyone,” Amanda Blanc, Group CEO, Aviva plc.
“At Generali, we want to actively support a fair and inclusive transition to a net-zero emissions economy. The UN-convened Net-Zero Insurance Alliance allows us to join forces with institutions and our peers which share this commitment to achieve a greater and longer-lasting impact. United we are stronger!” Philippe Donnet, Group CEO, Generali
“Munich Re has set ambitious climate targets in 2020 that include the liability side of our business. Being a founding member of the Net-Zero Insurance Alliance underlines our climate commitment. As a leading global re- and primary insurer we will continue to support the transition to net zero through our pioneering risk solutions and pursuing science-based decarbonisation targets,” Dr. Joachim Wenning, Chairman of the Board of Management, Munich Re
“Collective action is the only way we can address the grand challenge of our time: climate change. SCOR is proud to be a founding member of the NZIA, working alongside other industry leaders to support the transformational changes that are critical to society. In doing so, we commit to accelerating the race to net zero and furthering our long-term mission,” Laurent Rousseau, CEO, SCOR.
“By co-founding the Net-Zero Insurance Alliance, Swiss Re can work with other reinsurers and insurers to build on its commitment to transition to a low-carbon economy, through its underwriting expertise. We see sustainability as a long-term value driver and the NZIA is an important and logical next step in the race to net zero,” Christian Mumenthaler, Group CEO, Swiss Re.
“Net-zero underwriting is a critical step and furthers Zurich’s climate efforts beyond our own operations and investments. It reinforces our deep commitment to continue to engage with our customers to deliver solutions as we navigate together the transition to a low-carbon world, benefiting future generations,” Mario Greco, Group CEO, Zurich Insurance Group.