The UN Environment Programme’s Financial Initiative launched the Principles of Sustainable Insurance (PSI) at the International Insurance Society (IIS) 48th Annual Seminar in Rio de Janeiro last week. The PSI effort was part of the broad range of actions presented at the Rio +20 UN Conference on Sustainable Development, being held concurrently in Rio. A survey of seminar participants tested their reaction to the PSI launch. As with other spot surveys during the sessions, this one was sponsored by ACORD.
The survey asked seminar delegates which aspect of company activity posed the greatest challenge to PSI implementation. Company strategy ranked first at 37% reflecting the comprehensive scope of impact of PSI on insurers. Risk management and underwriting ranked second at 22%. This basic service of insurance is the way that PSI concepts can be translated in the business and as societal contributions.
The respondents were also asked to identify the most urgent action needed to reduce risk for clients and raise awareness and stimulation action on environmental, social and governance (ESG) issues to which PSI is addressed. The response of 34% was access to insurance. That is, the insurance industry can help most by offering insurance to take account of these factors. Second, at 28%, was the extension of risk management analysis and coverage to climate change and extreme weather risks.
When asked who in the insurance community can most influence awareness raising and stimulation of action on ESG issues in insurance, respondents identified themselves, i.e., insurers (30%) and insurance regulators and supervisors (29%). Thus, advancement of the PSI agenda depends on its broad acceptance and action by the industry and its regulators. Reinsurers, who have been among the leaders of the development efforts in the UNEP-FI, were not accorded large influence at 8%.
Surprisingly, the part of the insurance community identified as being most effective in promoting better insurance management and widespread action on ESG issues was government, regulators and other policymakers (50%), followed by business and industry associations (22%). Government and politicians are often cited as posing obstacles to effective market development, yet for advancing a new extension of its activity to social concerns, insurers seek the aid of government. If that help comes in the form of new regulatory requirements, that view may change.
UNEP-FI was interested in how it might help insurers to advance the PSI agenda. Most responses were split between the provision of UN platforms for dialogue with government and other social sectors (28%) and sponsoring of research, models, analysis, tools and metrics (26%). This may reflect the success of the UN-industry partnership in formulating the PSI. Regardless, the industry will continue various individual and collective analysis and organisation of industry forums on these issues.
The group was also asked to identify the ways the insurance industry could be the most effective in promoting sustainable economics. Its primary functions as risk managers (44%) and as institutional investors (30%) led the responses. The industry already applies its risk management skills to various PSI concerns (e.g., weather-related insurance, governance considerations in ERM). Its major role in investment markets has already been recognized in the prominent role insurers have played in the prior UN initiative to establish the Principles of Responsible Investment.
The launch of the PSI at the IIS Annual Seminar is expected to begin a rapid process of adding industry signatories to the founding signatories represented at the seminar.
Munich Re, RSA, and Swiss Re are amongst the 30 insurers that have already agreed to support the programme.
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