We are grateful to NDCi.global adviser Butch Bacani for this roundup of recent Paris-relevant activity in the insurance sector
As world leaders, business and civil society come together in Bonn for the 2017 UN Climate Change Conference (COP23), important developments are taking place within the global insurance industry and the insurance regulatory and supervisory community to support the transformation to a resilient, inclusive and sustainable economy.
This month, insurance industry leaders and key stakeholders are gathering in London for the Insurance & Climate Risk event. The event will feature industry practices to manage climate change risks and opportunities, and how these could be enhanced and brought to scale.
I’ll be delivering the opening keynote address on “Climate change action and sustainable development in the context of the insurance industry, financial regulation and global policy frameworks”, as well as the closing remarks.
Industry leaders and regulators speaking include Stephen Catlin of the XL Group; John Scott, Chief Risk Officer of Zurich Insurance Group; Matthias Seewald, Chief Investment Officer of Allianz; Jelle van der Giessen, Chief Investment Officer of the NN Group; and James Orr, Chief Actuary for General Insurance at the Bank of England’s Prudential Regulation Authority.
This timely gathering will cover key topics such as the disruptive cascade effect of physical environmental risks; climate risk modelling; environmental, social and governance criteria in insurance underwriting and investments; climate change and coal policies of leading insurers; green bonds and renewable energy investments; and managing the transition to a low-carbon economy.
Many organisations that have adopted UN Environment’s Principles for Sustainable Insurance (PSI) will speak at this event. They include PSI signatory companies such as Allianz, AXA, NN Group, SCOR, Swiss Re and Zurich, and PSI supporting institutions such as Ceres, ClimateWise, and the International Cooperative & Mutual Insurance Federation.
The global community must also address the need to finance adaptation and to increase private sector support for adaptation and mitigation actions, including insurance. Our meeting in Bonn comes at a time when it is no longer sufficient to maintain the momentum. It is my intention to make COP23 Fiji in Bonn the occasion when we accelerated the pace of positive change and acted more boldly than we thought possible.
– Frank Bainimaram, Prime Minister of Fiji and President of COP23
Also this month, the world’s microinsurance community—from insurers, distribution channels, regulators, and investment funds; to policymakers, international and civil society organisations, and academics—will gather at the13th International Microinsurance Conference in Lima. The event aims to build on the continued growth of insurance for low-income people over the past decade in order to support sustainable development.
According to the Munich Re Foundation, nearly 300 million low-income people in developing countries are now insured, with new technologies boosting market coverage. For example, more than 40 million people in Asia are insured through mobile phones. Furthermore, the G7 is facilitating access to climate risk insurance for an additional 400 million poor and vulnerable people in developing countries by 2020. Yet many people remain vulnerable and still do not have access to a financial safety net, and this situation will be compounded as the global middle class is expected to grow to nearly five billion within two decades.
In this regard, last August, the PSI and the Microinsurance Network forged a global partnership to promote inclusive and sustainable insurance markets and help achieve the UN Sustainable Development Goals.
Equally, there is growing awareness and action on sustainability issues within the global insurance regulatory and supervisory community.
The European Insurance & Occupational Pensions Authority invited me to speak about “Sustainable insurance: Turning environmental, social and governance challenges into sustainable opportunities” at the 5th Global Insurance Supervision Conference in Frankfurt last July.
And last month, insurance regulators from around the world gathered in Kuala Lumpur for the third meeting of the Sustainable Insurance Forum (SIF). Launched in December 2016 and convened by UN Environment, the SIF is an international network of insurance regulators and supervisors working together to strengthen their understanding of and response to relevant sustainability issues.
The SIF meeting was hosted by Malaysia’s central bank and held back-to-back with the Annual Conference of the International Association of Insurance Supervisors. Regulators presented how they were approaching climate risks, driving better disclosure from insurers, and incorporating climate risk factors into routine tools such as stress tests. Insurance experts and rating agencies from the Asia-Pacific and the international insurance industry also spoke about the materiality of sustainability issues to insurance underwriting and investment management, as well as a range of industry initiatives and innovations.
The SIF is now developing guidance for insurance regulators so that insurers can respond effectively to climate risks across their insurance and investment activities. Furthermore, regulators are creating national roadmaps and platforms to promote sustainable insurance in their jurisdictions.
Last July, the SIF issued a statement supporting the recommendations of the Financial Stability Board’s Task Force on Climate-related Financial Disclosures—the first group of financial regulators to do so. In August, the SIF released its first report, Sustainable insurance: The emerging agenda for supervisors and regulators, providing a global overview of actions by leading regulators to manage sustainability challenges.
These important developments provide a snapshot of a growing convergence of sustainable insurance thinking and practices across the insurance, regulatory and policymaking communities.
In short, whether you’re an insurer, a regulator or a policymaker, you need to manage the risks and opportunities posed by sustainability challenges.
There is no excuse for inaction, and an indispensable factor is collaboration.
At UN Environment, Butch Bacani leads the development and implementation of the global strategy and work programme of the Principles for Sustainable Insurance (PSI) Initiative. Butch has authored pioneering studies, including the first global sustainability survey of the insurance industry, global research and insurance industry statements on climate change and disaster risk management, and a legal roadmap on fiduciary duty and responsible investment.