The Net-Zero Insurance Alliance, the UN-convened entity established two years ago for insurers to help explore reducing their carbon footprint, seems to have gone from darling of the sector to poisoned chalice overnight.
The alliance has been accused of being anti-competitive by right wing anti-ESG pressure groups in the US causing the US attorneys-general to issue a letter expressing their concerns over the alliance conflicting with antitrust laws. Cynics have suggested that the real force behind the action is ‘big oil’.
One result of this brouhaha has been the exodus of a number of leading insurers and reinsurers from the alliance – which, in turn, is seen as being a bellwether for similar alliances throughout the financial services industry.
Insurers in the APAC region have not remained unaffected by the NZIA travails – with some leading carriers telling Asia Insurance Review that they cannot comment on any issues relating to climate change as a result.
Many of the (re)insurers that have withdrawn from the NZIA have indicated that they intend to pursue their own net-zero goals. Some have also privately expressed their regret over the recent developments but indicated that they neither have the budget nor the stomach for the protracted legal battle they might face if they remained in the alliance.
The irony of seeing photographs of New York shrouded in smoke from the wildfires that have been burning for the past month or so in Canada may not have been lost on any of the parties to the NZIA dispute.
New York was reported to have been suffering from the worst air quality it had ever breathed. To residents of Sydney, the New York scenes will have seemed depressingly familiar since the Australian city suffered in a similar way very recently.
Munich Re estimates that bushfires and wildfires globally have caused $69bn worth of losses between 2018 and 2022 – resulting in claims of $39bn.
The sobering fact is that climate change in its many manifestations – bushfire, flood, hail, general storm, typhoon – have abruptly upended the traditional dynamics of P&C insurance. Equally alarmingly, reinsurers are re-evaluating their tried-and-true business models because they simply don’t work anymore.
Early signs of this are evident in the price hardening that the industry saw at the start of the year and more granular focus on their terms and conditions. It may not be too long before some reinsurers simply stop writing certain classes of business.
Scientists estimate that even if most countries achieve the net-zero goals that they have set themselves, we are still looking at a minimum of two more decades of rising temperatures because these rises are already ‘baked in’ to the atmosphere.
The plain fact is that net zero cannot be an optional extra for the (re)insurance industry – it has to be a prime driving force for the foreseeable future. Participants in the sector can decide whether they want to tackle this alone or as part of an alliance – but they cannot choose not to pursue net zero.
Failure to do so could make bushfire smoke palls over New York or Sydney or Singapore of Shanghai a regular occurrence and not simply ‘a one in 100-year event’. A
Paul McNamara
Editorial director
Asia Insurance Review