GVNW: Customer voice needed in ESG insurance debate
The role of insurers as underwriters and investors in the battle to halt climate change has come into sharp focus in recent times, not least as campaign groups such as Insure Our Future press successfully for the market to pull out of the fossil fuel sector.
It was not surprising therefore that this was a focus of lively debate during the first day of the GVNW Symposium yesterday as insurance managers, brokers and insurers discussed the way forward and how the market should collectively work to seek positive outcomes that work for all.
Oliver Hauner from the German Insurance Association (GDV) opened the podium discussion on the compatibility of risk transfer and sustainability, by outlining the GDV’s position regarding sustainability.
The GDV management committee outlined its approach in January 2021. It has selected 2025 as a major milestone, for example aiming for climate neutrality in German insurers’ business processes by then and the exclusion of industrial risks that are harmful to a sustainable economy (climate-neutral portfolio).
But not everyone is convinced of the insurers’ real commitment to such goals. Kai-Franck Büchter, CEO of Aon Risk Solutions Germany, questioned the insurance sector’s commitment to the whole sustainability issue.
He suggested that some of the current underwriting smacks of hypocrisy, with insurers talking a good game but avoiding risks, even when they meet ESG criteria, if they don’t necessarily fit with their business models.
This is not just about avoiding industrial activity that is harmful to the climate but also supporting activity that is beneficial. There was general agreement among the panel, for example, that underwriting needs to catch up with renewable energy technologies.
Dr Jürgen Kurth, head of P&C underwriting risk management, AXA XL, suggested that more discussion among insurers, their clients and brokers would go a long way to addressing the deficit and establishing clear underwriting criteria.
Patrick Fiedler, senior vice-president corporate insurance, BASF, echoed this sentiment. He said: “Insurers have a mandate to attach a price to risk. If insurers fail to offer cover or overcharge for such risks as offshore wind farms, recycling plants or cyber, they are not fulfilling their duty to society.”
Petra Riga-Müller, board member at Zurich Germany, pointed out that Zurich has been committed to the promotion of sustainability for some time already, for example as a founder member of the UN Net-Zero Asset Owner Alliance.
She also agreed with the importance of cooperation among business partners, saying: “We need to take our customers with us on the path to climate neutrality.”
At the same time, the panel stressed that this doesn’t mean insurers have banished non-ESG-compatible criteria from their books.
Alexander Mahnke, GVNW chairman, pointed out that insurers have a social and business responsibility to cover risks. Some countries still depend on non-renewable energies.
He suggested that insurers should work to promote new technologies and adopt a nuanced approach to CO2 emitters, such as working with them while facilitating the transition to climate neutrality.
Investment is a significant lever in that regard. The GDV supports the UN’s Principles for Responsible Investment and has set 2050 as the target for its members to have climate-neutral investment portfolios.
Mr Kurth also said: “We all know that renewable technologies can involve substantial losses. Nevertheless, insurers do work with them, and rightly so.”
In conclusion, the panel agreed that sustainability is an extremely broad issue that has inevitably attracted enormous discussion. They welcomed the fact that insurers have now moved from talking to taking action.
At the same time, it is a process and changes will not come overnight. That’s where timeframes such as the GDV targets come in.
Regarding the subject of the debate – whether sustainability has stopped risk transfer – the last word lies with Mr Mahnke: “If businesses are legal, they must be insurable.”
