The United Nations' new net-zero insurance initiative is an "even safer space for complementary efforts on climate action" than the ill-fated Net-Zero Insurance Alliance, said Butch Bacani, the initiative's chairman.

The UN shuttered the Net-Zero Insurance Alliance (NZIA) on April 25 and launched the Forum for Insurance Transition to Net Zero (FIT), with Bacani, who heads insurance for the UN Environment Programme Finance initiative, as its chair.

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," Bacani said in an interview, 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," Bacani said.

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.

Broader remit

The FIT is "an entirely new structure and initiative," Bacani said, 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," Bacani said.

The FIT has outlined four initial priorities: 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; and tackling challenges and opportunities to develop insurance solutions and taxonomies that would support the net-zero transition.

Under the first priority, the FIT will go beyond the NZIA's work on measuring greenhouse gas emissions in insurance portfolios and setting targets to reduce them, which were "starting points and not endpoints," Bacani said. In developing new net-zero insurance concepts, the organization will look at areas other than property and casualty underwriting, such as the role that claims management, life and health underwriting, and brokers can play in the journey to net-zero. "We know that brokers also have a role to play, and that's not well articulated at the moment," Bacani said.

Creating the FIT will mean shifting away from the NZIA concept of "self regulation," where insurers would set their own net-zero targets, and moving toward a combination of "soft regulation," where the UN and insurance participants will work more closely with external net-zero standards setters, such as the Science Based Targets initiative, and "hard regulation," where UNEP and the insurance industry will work with regulators and supervisors "to embed net-zero insurance thinking and practices into insurance regulation and supervision," Bacani said.

The new approach has been welcomed by Insure Our Future, a collective of climate activist groups urging the industry to stop insuring fossil fuel production.

"We are encouraged by the inclusion of regulators, supervisory authorities and civil society actors in the FIT, as this provides an opportunity for real and meaningful solutions that align with global climate goals," an Insure Our Future spokesperson said in an email. "It is crucial that the FIT focus on mitigation as well as adaptation, and that members take a decisive science-based approach centering on action."

Representatives from two organizations in the Insure Our Future network — Reclaim Finance and The Sunrise Project — sit on the FIT's science, research and civil society consultative group.

Bacani said adapting to climate change and reducing greenhouse gas emissions "are totally complementary and consistent efforts, whereas most of the time, people tend to silo each one." He added: "For us, it's a very clear and coherent strategy."

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 Ltd., 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. Bacani said he could not speak for the companies not present but that "the door is wide open to all organizations around the world."

While the FIT wants to have more participants of all types and from all regions, Bacani said, "We do have critical mass right now across the board," and noted that the initiative had only recently launched and that its current state is "definitely not the endpoint."

He added that 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," Bacani said. 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, Bacani said.