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Four major insurers quit industry net zero initiative

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Four major insurers quit industry net zero initiative

Three of Europe’s biggest insurers and a large Japanese insurer have quit the Net-Zero Insurance Alliance as growing US political pressure and legal fears plunge the climate initiative into crisis.

Axa, the group’s former chair, Allianz, and Scor, as well as Japan’s Sompo Holdings, said on Thursday that they were leaving the NZIA, which is one part of Mark Carney’s umbrella group Glasgow Financial Alliance for Net Zero, created by the former Bank of England governor ahead of the UN climate summit held in Glasgow in 2021.

The Australian insurer QBE said on Friday it had also left the climate club, after joining in February 2022.

The departures bring the total number of large insurers which have left the NZIA to at least nine, severely curbing its collective power and posing a question over its future. Its website listed 22 members on Thursday.

Gfanz and its members have come under attack from Republican politicians in the US, who are targeting collective climate action groups they perceive to be unfairly hitting the oil and gas industry.

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On Friday, Gfanz said the “political attacks” were interfering with insurers’ “efforts to price climate risk, which will harm policyholders, main street investors and local economies”. It pledged to continue to support insurers’ efforts to develop transition plans.

Other than a high-profile departure from the US asset manager Vanguard in December, Gfanz’s asset management, banking and asset owner subgroups have mostly weathered the storm.

However, its insurance arm, the NZIA, has struggled to gain members outside of Europe and Asia. And, earlier this month, its members were sent a letter from US state attorneys-general raising “serious concerns” over whether the alliance complied with antitrust laws.

Munich Re, one of the world’s biggest reinsurers and a founding member of the NZIA, quit the group in late March. Its chief executive said he did not want to expose the group to “material antitrust risks”.

Zurich, an insurance group, and Hannover Re, another reinsurer, left in April. Reinsurer Swiss Re also left earlier this week.

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“As the Net-Zero Insurance Alliance disintegrates before our eyes, we must ask why these huge companies with their hordes of lawyers did not see antitrust issues as a major obstacle when they founded the alliance. And we must wonder whether their ditching of the alliance has more to do with fears of losing business in the US than real legal jeopardy,” said Patrick McCully, senior analyst at the non-profit Reclaim Finance.

Two people briefed on the decisions by insurers to quit said they did not think that the initiative, which has considered competition issues from the start, would lose a legal fight, but feared the distraction it would cause. “This is a battle that insurers can spare themselves,” said one.

European governments have also privately expressed concerns that insurers in the NZIA could cause the cost of energy to rise if they collectively stopped underwriting fossil fuels, according to a person close to the leadership team at the Glasgow Financial Alliance for Net Zero.

“For national security [reasons] they are worried about keeping the lights on,” the person said.

France’s Axa said on Thursday that it would “continue its individual sustainability journey, as an insurer, an investor and a responsible company”. 

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Allianz said it remained “fully committed” to a parallel organisation for asset owners.

Reinsurer Scor’s departure was announced by its new chief executive at Thursday’s annual meeting, alongside a set of new climate pledges.

The Japanese insurer Sompo, which joined the alliance last June, said it would continue to pursue its climate goals “as vigorously” outside the group.

Insurers have come under increasing pressure from activist investors and campaigners in recent years to cut their coverage of the most polluting sectors.

The NZIA was one attempt to corral insurers around the goal of reducing the carbon footprint of their underwriting, but critics highlighted the lack of US members and the fact that a ban on insuring coal was not a condition of joining.

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The challenges faced by the NZIA demonstrate the need for greater intervention by governments, argued Peter Bosshard, co-ordinator of the Insure our Future advocacy group: “If the insurers can no longer act collectively, this is a strong reason for regulation.”

Lloyd’s of London, the City’s speciality insurance market, which was subject to yet another protest by climate activists at its annual meeting on Thursday, said it remained an NZIA member. It later added that it was reviewing the letter sent by US state attorneys-general and noted that it was “for the individual businesses that operate in the Lloyd’s market to make their own business and strategy decisions”.

The United Nations Environment Programme Finance Initiative, which convenes the NZIA, did not immediately respond to a request for comment on the latest departures, but has previously noted that it is “a voluntary initiative”.

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So What Is the Debt Limit Anyway? Here’s What to Know.

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So What Is the Debt Limit Anyway? Here’s What to Know.

The wrangling over the nation’s debt limit raises a lot of questions, including what it actually is and why the United States has one.

Here’s everything you need to know.

The debt limit is a cap on the total amount of money that the United States is authorized to borrow to fund the government and meet its financial obligations.

Because the federal government runs budget deficits — meaning it spends more than it brings in through taxes and other revenue — it must borrow huge sums of money to pay its bills. Those obligations include funding for social safety net programs, interest on the national debt and salaries for members of the armed forces.

Approaching the debt ceiling often elicits calls by lawmakers to cut back on government spending. But lifting the debt limit does not actually authorize any new spending — in fact, it simply allows the United States to spend money on programs that have already been authorized by Congress.

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The United States officially hit its debt limit on Jan. 19, prompting the Treasury Department to use accounting maneuvers known as extraordinary measures to continue paying the government’s obligations and avoid a default. Those measures temporarily curb certain government investments so that the bills can continue to be paid.

Treasury Secretary Janet L. Yellen has warned lawmakers that the United States could run out of cash in early June if the borrowing cap isn’t raised or suspended.

The national debt crossed $31 trillion for the first time last year. The borrowing cap is set at $31.381 trillion.

According to the Constitution, Congress must authorize government borrowing. In the early 20th century, the debt limit was instituted so that the Treasury would not need to ask Congress for permission each time it had to issue debt to pay bills.

During World War I, Congress passed the Second Liberty Bond Act of 1917 to give the Treasury more flexibility to issue debt and manage federal finances. The debt limit started to take its current shape in 1939, when Congress consolidated different limits that had been set on different types of bonds into a single borrowing cap. At the time, the limit was set to $45 billion.

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While the debt limit was created to make government run more smoothly, many policymakers believe that it has become more trouble than it’s worth. In 2021, Ms. Yellen said she supported abolishing the debt limit.

If the government exhausts its extraordinary measures and runs out of cash, it would be unable to issue new debt. That means it would not have enough money to pay its bills, including interest and other payments it owes to bondholders, military salaries and benefits to retirees.

No one knows exactly what would happen if the United States gets to that point, but the government could default on its debt if it is unable to make required payments to its bondholders. Economists and Wall Street analysts warn that such a scenario would be economically devastating, and could plunge the entire world into a financial crisis.

Various ideas have been raised to ensure that critical payments are not missed — particularly payments to the investors who hold U.S. debt. But none of these ideas have ever been tried, and it remains unclear whether the government could actually continue paying any of its bills if it can’t borrow more money.

One idea that has been proposed is that the Treasury Department would prioritize certain payments to avoid defaulting on U.S. debt. In that case, the Treasury would first pay the bondholders who own U.S. Treasury debt, even if it delayed other financial obligations like government salaries or retirement benefits.

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So far, the Treasury seems to have ruled that out as an option. Ms. Yellen has said that such an approach would not avoid a debt “default” in the eyes of markets.

“Treasury systems have all been built to pay all of our bills when they’re due and on time, and not to prioritize one form of spending over another,” Ms. Yellen told reporters earlier this year.

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Investor favourite Mehmet Şimşek set to return as Turkish finance minister

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Investor favourite Mehmet Şimşek set to return as Turkish finance minister

Turkish president Recep Tayyip Erdoğan is set to appoint Mehmet Şimşek as finance and treasury minister, according to a person familiar with the negotiations, a move that would bring back to the government an economist who is widely respected by foreign investors.

Şimşek, a former senior Merrill Lynch economist, would be re-entering Turkey’s government at a time when the country’s $900bn economy is under intense strain and foreign investors have fled after years of unconventional policies pursued by Erdoğan’s government.

If he is appointed, it would be a signal that Erdoğan may be willing to reverse his unorthodox policies, which many blame for triggering an acute cost of living crisis as the lira has tumbled to record lows against the dollar.

Şimşek was Turkey’s deputy prime minister for economic affairs. He had served as finance minister from 2009 to 2015, when he assumed the deputy prime minister role. He stepped down in 2018 when Erdoğan appointed his son-in-law as finance minister, but has now found common ground with the president on key policy matters, according to the person familiar with the talks.

Erdoğan, who was re-elected to a new five-year term as president on Sunday, is expected to unveil his new cabinet on Saturday. Turkey’s government did not immediately comment on the matter. The news that Şimşek was set to be appointed was first reported by Bloomberg.

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Clayton sheriff’s office employee arrested for ‘encouraging’ people to steal from inmates

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Clayton sheriff’s office employee arrested for ‘encouraging’ people to steal from inmates

Clayton County Sheriff Levon Allen has arrested a fifth employee in less than one week.

Sarai Tatiana Ali, a contractor with the sheriff’s office, was arrested and charged with obstruction and being a party to a crime.

Sheriff Allen says Ali aided and abetted suspects and shared confidential information before encouraging her crew to steal from inmates.

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“I would rather have one good deputy than 100 crooked ones,” Allen said in a statement on Thursday night. “I won’t stop until I get every last one of them out of my agency.”

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Jail records show that Ali was booked into the Clayton County Jail just before midnight on Wednesday. She is currently being held on a $5,500 bond.

Ali’s arrest comes as part of Allen’s “Operation Clean House.”

Less than an hour before Ali was booked into the jail, fellow contractor Iyana Dixon was booked, jail records show. She was accused of using a stolen credit card at a Macy’s department store.

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Both arrests come just days after three others were arrested.

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Correctional Officer Tabitha Clifton and nurse Jessica Castellanos were arrested on Friday and accused of giving contraband to inmates.

Less than 24 hours before, Correctional Officer Sean Hollinshead was accused of “orchestrating” an attack on an inmate.

Allen says Hollinshead placed an inmate into a high-risk housing unit where he was beaten and stabbed. They say he then failed to provide aid to the inmate.

Dixon is still being held in the Clayton County Jail while Hollinshead, Clifton and Castellanos have since been released.

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