Paduano calls on insurers to boost help on transition and sustainability risks

Valentina Paduano, Ferma board member and chairwoman of its Sustainability Committee, has called on the insurance industry to step up its efforts on sustainability to help their clients through the transition to net zero and deliver new cover for green risks. She believes insurers have an important role to play in supporting risk managers and their organisations with information required for compliance with the EU’s Corporate Sustainability Reporting Directive (CSRD) and the proposed Corporate Sustainability Due Diligence Directive (CSDDD). Combined, these two directives create harmonised requirements for large and listed companies to report on environmental and social risks and their impact Paduano told Commercial Risk Europe in a wider interview on the regulations that there is also a need for new insurance products to cover emerging sustainability risks and liabilities as more risk data becomes available. “We currently have a challenge with the insurance market that it is unable to address the needs of corporations to provide the right protections and coverage on these topics, on physical and transition risks,” she said. Insurers are struggling to respond quickly to the needs of large companies when it comes to climate change, according to Paduano. “With regards to [understanding] physical risk, the insurance market plays a crucial role in this process. In theory, they should have the right tools and methodology to estimate natural catastrophe exposures. They can support the organisation and risk managers to do this type of analysis for climate change. But currently the insurance market is reticent to cover those risks that they do not fully know, and we are in a situation where we need partners that can take this risk together with us,” she said. Paduano would like to see the insurance industry focus less on data and more on collaboration in this transition period. “It is true they do not have the data to assess the risk, but there should be a buffer of risk they should take together with organisations. We need to increase the level of communication and collaboration between corporates and the insurance market,” she said. “Rather than ask exclusively for data every time, they should collaborate to understand and support the company in estimating and calculating climate risk – the ESG risk in general. They should be more aligned in terms of language, and the speed at which we need to approach these topics. It seems that the speed of the insurance companies is slower than their customers,” Paduano said. Sustainability reporting requirements like the CSRD should mean more information, clearer information and more comparable information, according to Paduano. This should make it easier for the insurance industry to develop new products and services to help companies with sustainability-related risks, she said. “The aim of the CSRD is to have more information on non-financial risks, and to have a more transparent overview of company performance, and to make this information more comparable between companies. This will surely be a positive development for the insurance market,” she added. She also urged risk managers to step up and help their organisations prepare for the upcoming EU regulations on sustainability reporting and environmental and human rights due diligence within value chains.

Paduano calls on insurers to boost help on transition and sustainability risks

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