A group of the world’s biggest insurers and reinsurers that jointly pledged to eliminate greenhouse gas emissions from their underwriting activities have run into an unexpected opponent of their planet-friendly mission: competition law.

The Net-Zero Insurance Alliance, which counts AXA SA, Allianz SE and Swiss Re AG among its members, has purposely limited the scope of its collaboration to avoid potential violations of antitrust rules, said people familiar with the matter, who asked not to be identified discussing non-public information. A proposal to include a commitment to exit coal insurance as part of the terms of group membership was scrapped following advice from attorneys at Norton Rose Fulbright, one of the people said.

Antitrust rules that exist to protect consumers from cartels and monopolies are at odds with a world where cutting emissions is a top priority. And while competition authorities have begun exploring how current rules may hinder government-sponsored sustainability goals, until the rules are changed, they serve as a potential impediment to climate action.

Members of the Net-Zero Insurance Alliance have made an overarching commitment to reach net-zero emissions from their insurance and reinsurance underwriting portfolios by 2050, though it will be up to each company to determine how they reach the target.

The insurance coalition is part of the larger Glasgow Financial Alliance for Net Zero, which includes over 450 companies with more than $130 trillion of assets committing to zero net financed emissions and trumpets its broad support as a point of pride.

Attorneys at law firm Norton Rose Fulbright advised the insurance group that its members might be liable to anti-competition litigation if they act together against specific industries, the people said. A spokeswoman for Norton Rose declined to comment on the firm’s recommendations to the Alliance or the relevance of competition law to net-zero objectives.

Butch Bacani, program leader at the United Nations Environment Programme’s Principles for Sustainable Insurance Initiative and key architect of the alliance, said he’s disappointed that the group faces such a roadblock, especially since climate science demands urgent action on fossil fuels. However, insurers don’t want “to run afoul of competition law” given the severe penalties for contravening such rules, he said.

“We can see the bigger picture of net-zero societies and the wider sustainability agenda, but that is still not permeating existing laws,” Bacani said.

Spokespeople for Allianz, AXA and Swiss Re, when asked to comment on the antitrust issues facing the insurance alliance, gave near identical statements. Their key messages: The climate crisis is so vast it necessitates collaboration between different stakeholders; the insurance alliance’s founding members have complied with all applicable laws and regulations; and the alliance can achieve its ultimate net-zero ambitions while abiding with the law.

Antitrust questions arise when insurers come together and discuss which risks they will underwrite and which they won’t since antitrust authorities normally say competitors shouldn’t talk to each other about their policies, said Maurits Dolmans, a partner at Cleary Gottlieb Steen & Hamilton LLP. Dolmans said it could be argued that a common goal of net zero by 2050 restricts commercial freedoms and could therefore be seen as an issue under competition law, though, in his view, coordination on net-zero underwriting is something that deserves to be exempted from antitrust rules.

Competition authorities in the European Union and the UK are not deaf to the criticisms.

UK Secretary of State for Business, Energy and Industrial Strategy asked its competition watchdog in July to provide advice to government on whether competition and consumer laws “constrain or frustrate initiatives that might support the UK’s net-zero and sustainability goals.”

EU antitrust chief Margrethe Vestager said in September that competition enforcers “need to make sure that we’re doing what we can to help” support green activities. The EU is exploring how competition rules interact with green policies and said industry coalitions with green objectives should discuss their ideas with antitrust authorities since there’s “huge scope to set up these agreements in line with the antitrust rules.”

Representatives of the Net-Zero Insurance Alliance have begun discussions with the EU on whether specific carve-outs can be introduced to competition law when environmental benefits outweigh competitive concerns, said one of the people. The early-stage talks are focused on technical details, the person said.

A spokesperson for the EU declined to comment on the talks.

“Competition law is adequate for our times, but enforcement policy should be adjusted to the climate crisis,” said Cleary’s Dolmans. “Enabling a carve-out for collective action toward net-zero emissions is one way of helping correct, though not completely undoing, the market failure we have today where the immediate economic penalties for emitting carbon are minuscule to non-existent.”

Taking a position on fossil fuels, especially coal, is critical to reaching net zero as the burning of thermal coal is the single largest contributor to the increase in global temperatures.

–With assistance from Aoife White.