While Hannover Re did not provide specific reasons for its exit, the company stated that it made the decision after careful consideration, while reaffirming its commitment to its own climate and sustainability goals.
The news comes just weeks after Eric Andersen, President of Aon PLC, one of the world’s largest insurance brokers, testified before a Senate committee, sounding the alarm on how climate change is impacting the insurance industry. Andersen highlighted that climate change is injecting uncertainty into an industry that relies on risk prediction, leading to higher prices and causing insurers to withdraw from high-risk markets.
Is the climate crisis damaging the insurance industry?
Andersen specifically pointed out that reinsurance companies, which provide coverage to insurers for catastrophic losses, have been pulling out of high-risk areas, particularly those prone to wildfires and floods. He further stated that climate change has created “a crisis of confidence around the ability to predict loss,” as the traditional risk assessment models may no longer be as reliable due to the changing climate patterns.
Drawing a parallel to the 2008 financial crisis, Andersen warned that the economy is currently overexposed to climate risk, just as it was overexposed to mortgage risk back then. He emphasised that the destabilising effects of climate change on the insurance industry are already being felt and called for urgent action to address this growing threat.
The testimony from Aon PLC’s President underscores the increasing challenges faced by the insurance industry as it grapples with the impacts of climate change, including rising costs, uncertainty in risk prediction, and the need for innovative solutions to address the evolving climate risks.
Allianz and Swiss Re are “monitoring developments”
The Talanx Group brand, which is also a member of the Climate Alliance Hannover 2035, stated that it remains dedicated to its sustainability strategy, associated goals, and support for the Paris Agreement. Hannover Re aims to achieve full climate neutrality by 2050 at the latest and has already operated with a net-zero carbon footprint at its Hannover location since 2016, with the same target set for all of its global business operations by 2030.
As a signatory to the Principles for Sustainable Insurance, Hannover Re is also involved in various regional, national, and global initiatives, associations, and advocacy groups. However, its list of affiliations no longer includes the NZIA.
The NZIA, which is backed by the United Nations, has not publicly reacted to the recent departures of Munich Re, Zurich, and now Hannover Re. The exits of these major names from the alliance raise questions about its future and potential impacts on global efforts to achieve net-zero emissions and combat climate change.
Founding members Allianz and Swiss Re have said they are “monitoring developments”, but have not confirmed their future plans with the alliance. Howver, reports suggest they have reaffirmed their commitments to net-zero.
An Allianz spokesperson said: “We are monitoring developments. In general, we believe in the power of effective partnerships to drive decarbonisation. The UN-convened Alliances are considered as world-leading in their efforts to mitigate climate change and to build climate resilience.”
Munch Re, Zurich and Hannover Re remain committed to sustainability goals
Hannover Re also says it remains committed to its sustainability strategy, the associated goals and its support for the Paris Agreement. “Regardless of this, Hannover Re remains committed to its sustainability strategy, the associated goals and its support for the Paris Agreement, and aims to achieve full climate neutrality by 2050 at the latest.”
These commitments were announced by the carrier in October 2021, and includes a commitment to achieve net zero emissions in business operations by 2030 and in its reinsurance portfolio and investments by 2050.
Hannover Re’s departure from the Net-Zero Insurance Alliance (NZIA) comes without a detailed explanation, following in the footsteps of Munich Re and Zurich, who recently left the alliance. Munich Re cited concerns about antitrust risks that could impact the scope of its decarbonisation goals, while Zurich stated a desire to focus its resources on supporting its customers with their transition to sustainability.
The reasons behind Hannover Re’s exit from the NZIA remain undisclosed, but these departures raise questions about the challenges and priorities that major insurers face in aligning their sustainability efforts with global initiatives.
However, the withdrawal of Munich Re, Zurich, and Hannover Re indicates other members might follow suit in the coming days and weeks ahead.
