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Insurers challenged by customers to reward sustainability efforts

Insurers were challenged by major corporate customers during this week’s Ferma Talks to follow the example of banks and reward them financially for their sustainability efforts.

Representatives of three of the leading global insurers responded by saying that they want to give customers credit for their progress on sustainability and are beginning to do so in some cases. But they cautioned that it is still early days in this very broadly defined area.

One insurer suggested that the key will be for the insurance industry to work together in partnership to develop robust and widely accepted sustainability KPIs and standards. He suggested that Ferma, as the representative body for the European risk and insurance management community, could play a leading role in such an effort.

Carlo Cosimi, president of Italian risk management association Anra, and Mario Ramirez Ortuzar, vice-president of Spanish association Agers, both complained that insurers aren’t rewarding sustainability efforts with cheaper premium or better cover.

Cosimi, head of corporate insurance and risk financing at Saipem, the Italian multinational oilfield services company, said it is hard for risk managers to explain to bosses and colleagues how insurers are rewarding them for their sustainability efforts. “I want to know what information I need to give to brokers and insurers to show that we are sustainable,” he said.

“The question the board asks to me is: what benefit can you bring home? If you look at the financial side, there are some lines of credit available that are reserved for sustainable clients. In the insurance sector at the moment, there is no particular line or consideration of your sustainability level,” added Cosimi.

Ortuzar, risk and assets manager at Madrid-based oil pipeline and storage group Exolum, said his company has not seen any reduction in premium for its sustainable efforts.

“In our case, it is important because we are managing 6,000 kilometres of pipelines moving hydrocarbons in Europe. We are trying to transition away from hydrocarbons,” he explained.

“We are investing a lot of money to do all these things. The oil and gas industry is in a huge transition and we need a lot of support from banks and insurers to deal with this transition,” added Ortuzar.

Edgar Puls, CEO of HDI Global, and Henning Haagen, board member at Allianz Global Corporate and Specialty (AGCS), both later agreed that insurance clearly has a big role to play in the sustainable future, but said its role remains a work in progress.

“This is not about pulling the plug and not insuring any industry. We have to follow the transition to a more sustainable future. This means on the one hand bringing down support for carbon and, on the other, supporting new technologies to substitute carbon. It is our responsibility to insure this,” said Puls.

AGCS’s Haagen said sustainability KPIs and consistent definitions would be a big help to measure and reward sustainability, and urged Ferma to play its part. “I can see common standards helping in terms of performance indicators for clients… we can’t have a heterogeneous approach to this. Therefore, this is something that the industry needs to work on and Ferma can be a help in developing KPIs,” he said.

Xavier Veyry, CEO of APAC and Europe at AXA XL, pointed out that his company and eight other leading (re)insurers have made a big step forward by supporting the creation of the UN-convened Net-Zero Insurance Alliance (NZIA).

The founding members of the NZIA are: AXA XL as chair, Allianz, Aviva, Generali, Munich Re, SCOR, Swiss Re, and Zurich. It is chaired by AXA XL’s group chief risk officer, Renaud Guidée.

The insurers are committing to individually transition their underwriting portfolios to net-zero greenhouse gas emissions by 2050, consistent with a maximum temperature rise of 1.5°C above pre-industrial levels by 2100. They have also committed to supporting this goal through their huge investment portfolios.

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