Insurers look to ease UN climate alliance rules after member exodus - sources

Shinhan Financial

04/07/2023 19:01

* 
      Members flee after group faced antitrust accusations in
U.S.
    

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      Group set to remove 6-month deadline to publish targets -
sources
    

        * 
      Would turn Net-Zero Insurance Alliance into 'talking shop'
- NGO
    

  
 (Adds more NGO reaction, details on recent exits, background on
the alliance)
    By Tommy Wilkes
       LONDON, July 4 (Reuters) - The remaining insurers in a
United Nations-backed coalition aimed at tackling climate change
are poised to loosen the alliance's membership requirements,
after a recent exodus of members, according to two people
familiar with the discussions.
    The U.N.-convened Net-Zero Insurance Alliance (NZIA) is set
to remove a six-month deadline for members to publish greenhouse
gas emissions targets alongside other changes to make membership
less prescriptive, the sources said.
    The hope is to "steady the ship" and create space for
ex-members to consider returning later, they said. 
    The NZIA has lost more than half its members including AXA
 AXAF.PA , Lloyd's of London and Tokio Marine  8766.T  since
attorneys general from 23 Republican-run U.S. states sent a May
15 letter seeking information about insurers' membership and
threatening legal action. 
    The attorneys general said the NZIA's requirements for
members to publish and meet greenhouse gas emission-reduction
targets appeared to violate antitrust laws, and that the
alliance's actions had pushed up insurance and other costs for
consumers.
    Launched in 2021 to drive insurers' efforts to hit zero
emissions on a net basis by 2050 in their underwriting
portfolios, the NZIA is one of several industry coalitions under
the Glasgow Financial Alliance for Net Zero (GFANZ) umbrella
group.
    The NZIA now has 12 members, down from a peak of 30. Other
GFANZ alliances have also faced U.S. political pressure but have
not seen many members leave.
    
    CONCERN FROM CAMPAIGNERS
    The NZIA's 'target-setting protocol' published in January
required insurers to publish their initial 2030 targets for
reducing emissions by end-July, or within six months of joining
for newer entrants, and then report their progress against the
targets annually.
    But remaining members, among them Britain's Aviva  AV.L ,
Italy's Generali  GASI.MI  and South Korea's Shinhan Life
 055550.KS , want to avoid insurers publishing targets
simultaneously, which could invite fresh accusations of
anti-competitive collaboration, the first source said, speaking
on condition of anonymity because of the sensitivity of the
matter.
    An NZIA spokesperson declined to comment.
    The potential for looser rules was met with concern by
environmental campaigners, who say insurers are already doing
too little to curb emissions and that aggressive collective
action is needed.
    "The NZIA has had very minimal requirements and expectations
of membership from the start," said Peter Bosshard, coordinator
of the Insure our Future campaign.  
    The alliance, Bosshard said, developed less stringent
requirements - such as not restricting fossil fuel underwriting
- than another investor coalition, the Net Zero Asset Owners
Alliance, precisely to avoid accusations it was breaching
anti-trust laws.     
    "The target-setting is the only thing left," he added.
Without such requirements "the NZIA would just become another
industry talking shop".
    Other proposals being discussed include making the alliance
a broader forum where insurance industry bodies participate in
areas like target-setting best practice, the first source said.
    The changes under discussion have not been finalised, the
sources said, and it's not clear how the alliance would deal
with insurers that drag their feet in publishing targets.
    
    U.S. EXPOSURE
    Insurers inside and outside the NZIA say they remain
committed to their net-zero pledges despite the backlash in the
United States. 
    They are convinced they are not violating antitrust rules,
but companies departing the coalition were concerned about their
exposure to regulatory and litigation risks, given U.S. states
are the industry's primary regulator. 
    Insurers with little U.S. exposure have also been quitting,
threatening the alliance's viability. 
    Insurance Australia Group  IAG.AX  declined to explain its
exit last month. Canada's Beneva said the U.S. political debate
around environmental, social and governance (ESG) criteria was
"a distraction from the actions around which the company wishes
to rally".
    Remaining members believe the NZIA still has a valuable
role, and point to methodologies it developed for assessing and
reporting on underwriting-linked emissions.    
    France's AXA, which chaired the NZIA before quitting in May,
last week published its first emissions goals for its insurance
portfolio.

 (Reporting by Tommy Reggiori Wilkes; Editing by Greg
Roumeliotis, Simon Jessop, Emelia Sithole-Matarise and David
Evans)
 ((thomas.wilkes@tr.com; +44 (0) 7769 955711;))