The United Nations Environment Programme (UNEP) is pleased to announce the creation of the Forum for Insurance Transition to Net Zero (FIT), a new UN-led and convened structured dialogue and multistakeholder forum to support the necessary acceleration and scaling up of voluntary climate action by the insurance industry and key stakeholders.
The creation of the Forum is a major new opportunity for UNEP, the insurance industry and key stakeholders, and takes into account the experience gained with the Net-Zero Insurance Alliance (NZIA) that first transformed net-zero insurance from theory to practice.
The United Nations Environment Programme (UNEP) convened a meeting with various key stakeholders to explore how insurance can facilitate the shift toward a net-zero emissions economy.
These discussions confirmed the immediate need to establish a new multistakeholder forum and outlined future priorities.
Forum for Insurance Transition collaborates with insurance market
Under UNEP’s leadership, the Forum for Insurance Transition (FIT) will collaborate with participants from the insurance market, including insurers, reinsurers, and brokers.
FIT will also engage with insurance regulators, net-zero standard-setters, the academic and scientific community, civil society, and other vital contributors, such as sustainability disclosure initiatives and real economy actors, to globally promote net-zero insurance practices (see about ESG Related-Risks for Directors & Officers).
Initial priorities for the FIT include
- Advancing frameworks for net-zero insurance metrics and voluntary targets, and developing new net-zero insurance concepts
- Developing a net-zero transition plan framework for insurance market participants
- Engaging with the real economy on the development of net-zero transition plans by corporates across different sectors
- Tackling challenges and opportunities to develop insurance solutions and taxonomies that would support the net-zero transition
The aim is to foster availability of insurance and finance for transition projects and technologies and net-zero activities (see ESG Strategy & Climate Risk Modelling).
The initial group of FIT members includes 19 insurers and reinsurers from diverse regions, including Africa, Asia, Europe, Latin America and the Caribbean, North America, and Oceania.
FIT plans to gather insights for its activities from two independent consultative groups—one consisting of insurance regulatory and supervisory authorities and the other comprising academic, research, and civil society organizations. The outcomes of FIT’s work are expected to be shared with the public (see Cyber Risks, Climate Change & ESG – Main Challenges for Insurance).
The founding members of the FIT’s Consultative Group of Insurance Regulators & Supervisors (CGIRS) comprise 16 insurance regulatory and supervisory authorities from all regions, including the Bank of England’s Prudential Regulation Authority, European Insurance & Occupational Pensions Authority, Monetary Authority of Singapore, Australian Prudential Regulation Authority, National Insurance Commission of Ghana, California Department of Insurance, and Brazilian Superintendence of Private Insurance.
The founding members of the FIT’s Consultative Group on Science, Research & Civil Society (CGSRC) comprise 11 renowned academic institutions and civil society organisations from different regions
Meanwhile, the FIT’s legal team comprises experts on antitrust and competition laws, sustainability, insurance and finance, among other core areas of expertise, from three leading global law firms.
UN’s new net-zero insurance forum is safer from antitrust attacks
Freshfields Bruckhaus Deringer LLB is acting as legal counsel for the FIT, with leadership from two partners. Additionally, one legal advisor each from Cleary Gottlieb Steen & Hamilton and Norton Rose Fulbright LLP are collaborating as special legal advisors, working closely with the Freshfields team.
The FIT has initiated its activities with a robust and diverse coalition of 46 organizations worldwide. It anticipates further expansion as more global organizations join its efforts to become fully operational in the near future.
As the United Nations Environment Programme (UNEP) evolves its engagement with the global insurance industry and key stakeholders, the Net Zero Insurance Alliance (NZIA) will cease operations on 25 April 2024.
Through the FIT, UNEP is committed to enhancing its collaboration with the global insurance industry and stakeholders, aiming to expedite and expand the transition to a net-zero economy. This effort contributes to addressing the global climate crisis and supports the vision of a resilient, sustainable, and prosperous future for all.
NZIA suffered a series of high-profile exits
The NZIA, convened by the UN, suffered a series of high-profile exits in 2023 after 23 attorneys general from Republican-led US states told the alliance that its activities appeared to violate state and federal antitrust laws.
The NZIA was compliant with antitrust rules, but the UN had taken the issues NZIA faced into consideration in the design of the FIT. The more diverse nature of the FIT’s participants is a “key factor” in making it a safer place for collaborating on net-zero, and the fact that the FIT is chaired by the UN, not an insurance company, lends to that effort.
Unlike the NZIA, where members were all insurers and reinsurers, the FIT comprises 19 insurance industry participants and two consultative groups: a 16-strong group of global regulators and 11 representatives from science, research and civil society. It also has six legal advisers. French insurer Axa SA chaired the NZIA before its exit in May 2023.
Lloyd’s of London has announced its resignation from the Net Zero Insurance Alliance (NZIA), becoming the tenth major player to do so. The decision, effective immediately, reflects the growing concerns and pressures faced by the insurance industry.
Lloyd’s emphasized its commitment to sustainability by pledging continued support for the United Nations’ Principles for Sustainable Insurance and the Sustainable Development Goals.
The company intends to pursue its sustainability strategy while actively contributing to the global economy’s transition.
The FIT is an entirely new structure and initiative, and its main purpose is to accelerate and scale up action on net-zero in the insurance industry.
The NZIA committed its members to reduce greenhouse gas emissions in their underwriting portfolios. The NZIA’s efforts required it to work more with those outside the scope of its membership, such as regulators, members of civil society and companies operating in the real economy.
A supply-side agenda only, meaning insurance market participants, was increasingly insufficient to drive the acceleration and scale that we wanted to see.
Next steps
While the list of the FIT’s insurance industry participants includes several large insurers, such as the UK’s Aviva PLC, Italy’s Assicurazioni Generali SpA and Australia’s Insurance Australia Group, the global powerhouses that left the NZIA, such as Munich Re, Swiss Re AG, Axa, Allianz SE and Zurich Insurance Group AG are not among them.
While the FIT wants to have more participants of all types and from all regions. The FIT is five times larger than the NZIA was at launch and is also more diverse geographically and by company type.
High on the FIT’s to-do list in the short term is developing a transition plan framework because it serves as an anchor for strategies and activities at the organization level on net-zero. The FIT will also work with the Science Based Targets initiative on the insurance pillar of its upcoming net-zero standard for financial institutions.
The ultimate aim is to embed net-zero insurance thinking and practices into day-to-day decision-making.
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AUTHOR: Oleg Parashchak – CEO Finance Media and Beinsure Media by WTW Reports
