According to reports, the Glasgow Financial Alliance for Net Zero (GFANZ) has raised concerns about the disruptive “political attacks” targeting insurers’ ability to accurately price climate risks.
In the past week, reinsurance giant Swiss Re became the latest to withdraw from the NZIA, which was convened by UNEP Finance Initiative’s Principles for Sustainable Insurance (PSI) at the G20 Climate Summit in Venice in 2021. Munich Re, Zurich Insurance and Hannover Re exited the alliance several months ago.
What is GFANZ?
GFANZ is a coalition of financial institutions, is backed by the United Nations and founded by former Bank of England Governor Mark, who is now a co-chair. It was established in 2021 in preparation for the UN climate summit, COP26, held in Glasgow.
According to reports, the concerns come in the wake of numerous insurance companies withdrawing from an industry climate group – the Net-Zero Insurance Alliance (NZIA) due to mounting pressure in the US.
However, the organisation hit back with the following statement: “In spite of the prevailing political headwinds, we remain committed to supporting insurers in managing climate risks and devising transition plans,” affirmed the GFANZ spokesperson.
In the statement, GFANZ focused on the detrimental impact of these political attacks on insurers’ independent efforts to assess climate risks. The spokesperson warned that such interference could have adverse consequences for policyholders, main street investors, and local economies.
Allianz, AXA and SCOR’s withdrawal from NZIA
The latest insurance firms to withdraw from the Net-Zero Insurance Alliance are Allianz, AXA, and SCOR, are three prominent European insurers. Their departure followed allegations by certain US Republican Attorneys General that these companies violated antitrust laws.
Additionally, Japan’s SOMPO Holdings, a major Asian insurer, has also disappeared from the alliance’s member list on the NZIA website. If confirmed, SOMPO would become the first non-European insurer to exit the alliance. At the time of reporting, a SOMPO spokesperson had not yet responded to requests for comment.
The departure of these major insurers raises questions about the future viability of the NZIA, established in 2021.
John Neal, CEO of Lloyd’s of London, expressed concerns this week, urging the alliance to revise its membership rules to prevent potential disintegration. Sources reveal that NZIA members have held several discussions this week regarding the available options for the alliance.
Some Republican politicians have initiated a campaign against financial institutions collaborating to address carbon emissions, part of a broader resistance against businesses incorporating environmental, social, and governance factors into their decision-making processes.
While Vanguard, one of the world’s largest asset managers, left another alliance for fund managers in December, citing a need for independence, other GFANZ groups have largely withstood the pressure.
Legal wranglings and political pressure to blame?
According to the official website of the Net-Zero Insurance Alliance (NZIA), the alliance currently comprises 23 members, including renowned companies such as Aviva, Lloyd’s of London, and Tokio Marine Holdings.
Legal experts contend that constructing a strong legal case against insurers for breaching antitrust laws would be a formidable task. However, it is worth noting that the NZIA proactively sought legal counsel when formulating its membership criteria.
