The Republicans’ success in dismantling a coalition of insurance firms dedicated to addressing climate change can be attributed to the fact that U.S. states serve as the primary regulators of the industry, according to interviews with industry executives and former officials.
The Net-Zero Insurance Alliance (NZIA), established in 2019 to encourage insurers to commit to achieving net-zero greenhouse gas emissions in their underwriting portfolios by 2050, has experienced a loss of 12 out of 28 members since attorneys general from 23 Republican-led U.S. states sent a letter to the alliance on May 15. The letter requested information about the insurers’ membership and threatened legal action due to alleged anti-competitive behavior leading to increased prices.
Republicans argue that by withholding insurance from specific sectors like oil and gas, insurers are imposing penalties on businesses and driving up costs for companies and consumers.
The attorneys general have transformed their critique of environmental, social, and corporate governance (ESG) practices in the business world into a political rallying cry. They have also targeted other climate coalitions of financial firms, including the Net-Zero Banking Alliance and the Net Zero Asset Managers initiative, through threats and information requests. However, these groups have not witnessed a significant number of defections, unlike the NZIA.
According to two insurance industry sources and a former regulator, the reason behind this discrepancy is that states regulate insurers, unlike major banks and asset managers that primarily fall under federal oversight in the United States.
“The attorneys general have taken advantage of these characteristics of the insurers,” stated Dave Jones, former insurance commissioner in California and current director of the Climate Risk Initiative at the University of California, Berkeley. Jones further expressed doubt regarding the attorneys generals’ accusations of anti-competitive behavior.
Curtis Ravenel, a senior advisor at the United Nations-backed Glasgow Financial Alliance for Net Zero (GFANZ), an umbrella organization that includes the NZIA, mentioned that insurers are less accustomed to political pressure compared to other financial services firms such as banks. Ravenel informed Reuters that state attorneys general were exploiting a fear factor based on their authority. Despite the pressure from Republicans, he does not anticipate significant departures from other climate alliances and urges the remaining 16 insurance firms in the NZIA to stay committed.
The NZIA had struggled to attract U.S. insurers as members. Most of the insurers that have withdrawn from the NZIA, including Spain’s Mapfre, France’s AXA (the alliance’s former chair), and Japan’s Tokio Marine and SOMPO, have substantial business interests in the United States.
Concerned by the departure of their peers, the remaining NZIA members have been engaging in discussions this week to determine their next course of action, according to individuals familiar with the matter.
Insurers have been unsettled by the growing number of departures among firms that have been assured by lawyers that they are not violating U.S. antitrust laws. They have also been alarmed by the recent exits of companies with minimal exposure to the United States.
While insurers like Britain’s Aviva and Dutch cooperative Achmea have announced their intention to remain in the NZIA, some firms emphasize the alliance’s accomplishments in establishing a standardized methodology for measuring and disclosing emissions from underwriting portfolios.
Out of the 15 insurers that have left the NZIA, only one has publicly explained its decision. Germany’s Munich Re, the first company to withdraw from the alliance on March 31, cited “material antitrust risks” resulting from the significant market share held by NZIA members as the reason for its departure, without mentioning the U.S. state attorneys general.
Munich Re continues to be a member of another GFANZ group, the Net Zero Asset Owners Alliance (NZAOA), along with Allianz, which recently left the NZIA. Munich Re stated that
