Ringing the Lutine bell twice: how the Net-Zero Insurance Alliance (NZIA) can help make a real-world impact on climate change

“I would like to raise an alarm bell today because of the fight against climate change,” he explained to an expert panel discussing the progress of the NZIA at ’The PSI after 10 years’ conference in Zürich. The NZIA was convened by the UN in 2021, bringing together eight founding members, including Swiss Re. Its membership now stretches to more than 20 insurers that represent over 11% of the world’s insurance premium volume.

Guidée explained that the goal for NZIA members is to transition underwriting portfolios to net-zero emissions and use underwriting as a tool to help corporates, who were part of this session, make that transition.

There is an opportunity, Guidée said, to ring the Lutine Bell twice – the sign of a ship recovered. But to achieve this, a lot of factors need to come together. This includes building a better understanding of the net-zero transition, increased cross-industry collaboration, defining transparent ways of measurement, and enabling policy and regulation.

“It's not just about us as financial services companies managing our own footprint. It's no longer about just insuring or reinsuring Nat Cat. It's all about ensuring the transition and taking that watershed moment very seriously,” summarised Roland Umbricht, Head of Global P&C at Allianz SE.

“There are new risks that we need to understand. There are new business methods, new ways of doing things,” agreed Penny Seach, Chief Underwriting Officer, Europe, Middle East & Africa (EMEA) at Zurich Insurance Group.

“Certainly, there will be a lot of upskilling required in the insurance world to be partners of the real economy,” added Thierry Léger, Group Chief Underwriting Officer at Swiss Re.

This sentiment was also shared by Peter Voser, Chairman of the Board of Directors at technology company ABB, one of three corporate panellists. However, he stressed that the onus was not only on the insurance industry itself but also on the corporate world to help build this knowledge. He urged insurers to engage with their business customers on a more regular basis to achieve this.

“There are some fundamental changes in the world happening at the moment,” Voser added. “It started with the AI revolution, the data revolution, the automation revolution, the electricity revolution. What we see at this stage, very clearly, is that these vertical industrial pillars are also becoming horizontal ones at the same time.”

“That means we, as corporates, have to to work together as well - not just with clients, but in an ecosystem. I think you, as insurance companies, should also think about these ecosystems and take them into account when you look at risks.”

Umbricht built on the need to think in terms of ecosystems and the move towards the circular economy. He added that there was potential for insurance to help the transition all along the insurance value chain – from underwriting, pricing through to claims handling (e.g. “repair vs. replace”; “build back better”).

“Collaboration is so critical to solving climate change,” said Erik Fyrwald, Chief Executive Officer of Syngenta Group, which works with farmers around the world to apply regenerative agricultural practices, restoring and enhancing biodiversity, soil health and productivity.

Fyrwald also stressed that, in agriculture, the race to net-zero would be compounded by a looming food security crisis in the wake of climate change, COVID-19 and conflicts such as the war in Ukraine. These challenges needed to be addressed together, with regenerative agriculture at the heart of the solution.

With the global carbon footprint fast becoming embedded in the underwriting scorecard, the need for global standards is another critical gap to be filled. “Until we actually have a global standard that is consistent, it's going to be quite difficult to engage in a really deep and meaningful way.” added Zurich’s Seach.

Developing this is part of the NZIA’s immediate priorities, as Swiss Re’s Léger explained: “Once we have that measure, each insurance company that is part of NZIA will actually have to make that number public and come up with an engagement to get to net-zero by 2050.“

Another vital ingredient for accelerating the net-zero transition will be supporting the work of governments and regulators. Allianz’s Umbricht pointed out that regulatory frameworks and industry frameworks needed to be aligned to move towards the shared goal of a sustainable economy. One area where policymakers could make a significant impact is by agreeing on carbon pricing.

In addition, Syngenta’s Fyrwald highlighted the opportunity for regulators and governments to incentivise farmers. “There’s already $700 billion a year in agriculture subsidies around the world. Just shift them from other things that have little impact on sustainability to reinforcing regenerative agricultural practices.”

Jan Jenisch, Chief Executive Officer and Member of the Board of Directors at Holcim, urged for more concerted efforts on regulations and standards for buildings and construction, which accounts for a large share of global carbon emissions:

“At Holcim, we are leading the building sector's transition to net-zero. Green building is happening around the world in many ways today. To accelerate the sector's transition we are partnering across our value chain to establish a common definition of what a sustainable building is so that construction norms can evolve accordingly. That’s one of the struggles we have at the moment, evolving building norms to reflect what's possible with today's innovation.”

But while regulators are key partners, frameworks must not become too restrictive. 
“We want to be technology agnostic,” said AXA’s Guidée. “We need a framework and boundaries. But it's very important that we don't stifle innovation by curbing it and being prescriptive.”

All panellists agreed that whatever regulatory or measurement schemes are put in place, they must ensure a fair transition. This includes not just developing economies but also – and critically – consumers, who need to be willing to pay more for more sustainable products.

As Léger commented: “Swiss Re Institute stated that investing in net-zero by 2050 is a net positive. Any dollar we spend today on protecting the world and bringing us to net-zero has a positive impact on the economy and for societal resilience.”

With this in place there is a chance the Lutine Bell can be rung twice.