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Climate champion insurers face headwinds

A joint corporate pledge to reduce and eventually eliminate greenhouse gas emissions has hit a legal snag.

The United Nations-convened Net Zero Insurance Alliance (NZIA) — with membership that began with 15 global insurance and reinsurance groups — has encouraged other insurers and reinsurers worldwide to commit to transitioning their underwriting portfolios to net-zero greenhouse gas emissions by 2050, consistent with a maximum temperature rise of 1.5C above pre-industrial levels by 2100.

Convened by the UN Environment Programme Finance Initiative, NZIA members committed to individually setting science-based intermediate targets every five years and independently reporting on their progress publicly on an annual basis.

But Bloomberg is reporting that a key proposal to include a commitment to exit coal insurance as a prerequisite to membership has now been scrapped after legal advice.

The published report said: “Antitrust rules that exist to protect consumers from cartels and monopolies are at odds with a world where cutting emissions is a top priority. And while competition authorities have begun exploring how current rules may hinder government-sponsored sustainability goals, until the rules are changed, they serve as a potential impediment to climate action.”

Global law firm Norton Rose Fulbright is listed among the top antitrust and competition practices in the world.

Attorneys from the firm reportedly advised the insurance group that its members might be liable to anti-competition litigation if they act together against specific industries, the news agency said, quoting unnamed sources.

Officials in both the EU and the UK are said to be exploring how competition rules interact with green policies.

Representatives of the Net Zero Insurance Alliance have begun discussions with the EU on whether specific carve-outs can be introduced to competition law when environmental benefits outweigh competitive concerns.

Coal as a fossil fuel is a key target in the race to net zero as the burning of thermal coal is the single largest contributor to the increase in global temperatures.

Legal obstacle or not, there has been growing pressure on financiers and insurers to quit coal. The same pressure groups faced by coalmines are also squaring off against their dwindling number of insurers.

Targeted by campaigners in Bermuda and London last year was Convex, the specialty insurer and reinsurer cofounded by Stephen Catlin.

Convex is targeted, the campaigners say, because it refuses to rule out providing insurance for the massive new Carmichael coalmine in Australia.

The group, Market Forces, has been vocal and strident. It attacked Convex’s Sustainability Statement posted to its website as saying nothing.

The Convex statement had included: “We have minor exposure to thermal coal and oil sands and their dedicated infrastructure in our direct underwriting portfolio which will not increase as a proportion of our business.”

For Market Forces it was not enough.

The world agreed to move away from coal at the 26th UN Climate Change Conference of the Parties (COP26) in Glasgow in November.

Yet, the Indian group Adani said at the beginning of the year that it was preparing the first coal shipment from its new Carmichael mine, from the world's largest new coal area, the Galilee Basin in Queensland, Australia, and will seek to expand to 60 million tonnes a year.

Surprisingly, there has been no confirmation of any shipment yet.

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Published January 24, 2022 at 7:57 am (Updated January 24, 2022 at 2:00 pm)

Climate champion insurers face headwinds

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