IN-DEPTH: State AGs Charge That Insurance Companies’ Net Zero Agenda May Violate US Antitrust Laws

Corporate collusion to target fossil fuel companies is illegal under Sherman Antitrust Act, experts say

A man climbs stairs on day two of the COP 26 United Nations Climate Change Conference at SECC in Glasgow, Scotland, on Nov. 1, 2021. Ian Forsyth/Getty Images

Attorneys general from 23 states issued a letter to 28 insurance companies on May 15 requesting information regarding possible violations by the insurers of U.S. antitrust laws.

In what could be the first step towards an antitrust lawsuit, the state AGs requested that the insurance companies provide details on their membership in climate associations like the Net Zero Insurance Alliance (NZIA) and the Net Zero Asset Owner Alliance (NZAOA), two United Nations-sponsored clubs whose members pledge to act in unison to transition global energy markets away from fossil fuels. The effort was led by Louisiana AG Jeff Landry and Utah AG Sean Reyes.

“I am concerned the Net Zero Insurance Alliance is stifling competition in Louisiana and driving up insurance costs for our consumers,” Landry stated. “We are investigating if their actions violate our antitrust and consumer protection laws.”

Reyes pointed out his concerns over the impact of environmental, social, and governance (ESG) activism. ESG is an umbrella term for ideologies ranging from climate change to racial and gender equity.

“The ESG movement has spread to every corner of the world’s financial and energy sectors, and unsuspecting Americans are paying the price,” Reyes said. “Insurers have an obligation to protect the interests of their clients, not advance a radical environmental agenda.”

Robert Bork Jr., president of the Antitrust Education Project, weighed in on the matter with The Epoch Times.

“The insurance companies that are involved with this net zero program are, quite frankly, out on a plank and they’ve sawed it off,” Bork said. “The Sherman [Antitrust] Act is pretty explicit about restraint of trade, which is exactly what they’re doing here by denying insurance to companies that they think aren’t doing the right thing when it comes to climate change and getting to a net zero future.”

Sherman Antitrust Act

The letter states that AGs are “concerned with the legality of your commitments to collaborate with other insurers and asset owners in order to advance an activist climate agenda … Under our nation’s antitrust laws and their state equivalents, it is well-established that certain arrangements among business competitors are strictly forbidden because they are unfair or unreasonably harmful to competition.”

The “consumer welfare standard” in antitrust law considers the extent to which corporate collusion harms consumers by restricting competition or driving up prices.

“Any time you discriminate against companies with whom you have a political disagreement, you are going to raise the cost of insurance, raise the cost of credit, raise prices, and consumers will be harmed by that,” Bork said.

Citing the Sherman Act, the AGs wrote to insurers that “‘an agreement among competitors not to do business with targeted individuals or businesses may be an illegal boycott, especially if the group of competitors working together has market power … Likewise, collective agreements to fix prices or ‘restrict production, sales, or output’ are illegal.”

Utah State Treasurer Marlo Oaks told The Epoch Times: “When you look at the net zero insurance alliances, basically insurance companies are committing to move to net zero in their underwriting and investment portfolios.

“And because of antitrust concerns three major insurance companies around the world have stepped away from the insurance alliance.”

In the past two months, Munich Re, Hannover Re, and Zurich Insurance Group have pulled out of NZIA, citing concerns about antitrust among their reasons.

“The opportunities to pursue decarbonization goals in a collective approach among insurers worldwide without exposing ourselves to material antitrust risks are so limited that it is more effective to pursue our climate ambition to reduce global warming individually,” Joachim Wenning, CEO of Munich Re, stated.

In their letter, state AGs demand that insurers divulge the communications they have had with other members of NZIA and NZAOA, the efforts they have made across their investment portfolios to compel net zero compliance, and incentives they have provided for the purchase of electric vehicles (EVs) over gasoline-powered cars.

While Bork said he “wouldn’t be surprised” if more insurers leave the climate clubs, “it wouldn’t absolve them of any liability for their actions previously.

“But it’s clear that they have suddenly realized, and I’m sure their lawyers are advising them, that they have antitrust exposure for the kinds of policies they’ve been applying to their customers and the arrangements they make with other insurers by participating in these ESG alliances,” he said.

Is ESG Politics or Risk Management?

In order to shield themselves from charges of acting to further political goals, insurers, banks, and asset managers often characterize their climate and social-justice policies as risk management rather than politics. Many press reports and industry analyses support this narrative.

Fitch, a rating agency, reports that “large weather-related losses for property and casualty (P&C) insurers highlight increasing environmental, physical risks many experts link to climate change.” Fitch rates companies according to their credit standing but also according to ESG criteria.

A number of news articles have reported that insurance companies faced record losses from extreme weather, which they attribute to climate change.

“The insurance industry is struggling to adapt to a new normal in which losses fueled by climate change are now regularly exceeding $100 billion a year,” Bloomberg News reported in January.

However, while also blaming climate change and extreme weather, a New York Times report concedes that “Americans are moving fastest to Florida, Texas and other states most at risk for climate-related natural disasters,” and that more people living in high-risk areas may help explain an increase in insurance losses.

Writing in the Wall Street Journal, climate analyst and author Bjorn Lomborg states that “despite what you may have heard, Atlantic hurricanes are not becoming more frequent. In fact, the frequency of hurricanes making landfall in the continental U.S. has declined slightly since 1900.

“And there aren’t more powerful hurricanes either,” Lomborg writes. “The frequency of Category 3 and above hurricanes making landfall since 1900 is also trending slightly down. A July Nature paper finds that the increases in strong hurricanes you’ve heard so much about are ‘not part of a century-scale increase, but a recovery from a deep minimum in the 1960s–1980s.’”

In its report, Fitch states that insurers face risks not only from a changing climate but also from social-justice issues, which could increase their legal liabilities. However, antitrust lawsuits from corporate collusion did not make the list of risks that insurers should be concerned about, according to Fitch.