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Today we’re covering big insurance and exploring why they’ve been calling it quits from global emissions co-ordination. Let’s get in to it.

Death, Taxes, and Insurance

While the world’s getting hotter, Insurance companies are getting colder. Cold feet that is. This week five of the largest insurers and Lloyd’s, the insurance marketplace all announced their exit from the Net Zero Insurance Alliance (NZIA). And it’s not why you think.

The insurance industry has a huge role to play in the green energy transition. Today, they help help protect downside risks both for traditional and green energy developments. On top of this, they also make large payouts in the case of extreme weather events.

In order to do this effectively, insurance companies need to have a strong grasp of the risks they’re underwriting. Once they’ve assessed a specific event or business, it’s up to them to price it appropriately so their business also makes money.

There’s a number of actions the insurance industry can take as part of the green energy transition. From simply refusing to insure the most emitting projects to aggressively pricing climate risk as part of their models, the Insurance industry has had pressure to take action on these fronts over the last decade.

Quitting while we’re behind

The NZIA was founded in 2021 but at least nine member have left the organisation since. Long story short, these insurers are worried that they might face legal action as a result of being a part of the alliance. Yep, you read that right.

The reason behind the turnarounds is that U.S. antitrust authorities have expressed concerns that the group could be unfairly colluding in their efforts to price climate risks. Regulators in the EU are also concerned. More specifically, they believe that if these insurers collectively stopped underwriting fossil fuels the cost of energy could rise drastically and impact their energy security.

It’s like if a teacher told you to share your notes with a student but then accused you of copying each other’s work. Insurance companies are in a tight spot and these ones would rather run the numbers themselves.

Now as the NZIA falls apart, it’s clear that there needs to be better coordination between different authorities to define the line between cooperation and collusion. The insurance industry giants involved insist they’ll keep up their efforts independently. We’ll be keeping watch.

The Strawman