Sustainability Matters for the Insurance Industry

Strategic Insights -

As the global shift towards sustainable business models gains momentum, insurance companies are grappling with the implications of a changing market. Whether it's customer activism, government regulations, or the need for climate resilience, insurers are taking major strides towards sustainable business models. EY reports that incorporating sustainability into core business strategies is a smart business strategy, with capital markets evaluating performance against environmental, social, and governance (ESG) criteria in investment decisions. Companies that fail to consider ESG criteria are at a disadvantage, with 90% of global investors revising their investments if companies do not consider ESG criteria within their business model.

Key Takeaways:

  • Insurers are facing a global shift towards more sustainable business models, driven by consumer activism, government regulations, and the need for climate resilience.
  • Incorporating sustainability into core business strategies is a smart business strategy, with capital markets evaluating performance against ESG criteria in investment decisions.
  • Companies that fail to consider ESG criteria are at a disadvantage, with 90% of global investors revising their investments if companies do not consider ESG criteria within their business model.
  • The United Nations Environment Programme Finance Initiative (UNEP FI) has launched a partnership between UNEP and the global financial sector to mobilize private sector finance for sustainable development.
  • Regulators are requiring sustainability reporting from insurers, and financial flows will be adjusted towards ESG criteria in accordance with the 2015 Paris Climate Conference.
  • Climate change is a top risk for insurers, with global natural disaster insured losses estimated to be as high as US$42 billion for the first half of 2021.
  • More than half of U.S. regulators indicate that climate change is likely to have a "high impact or an extremely high impact" on coverage availability and underwriting assumptions.
  • Customer preference is driving a shift towards more sustainable products and services, with Millennials and Gen Z being the most likely to make purchasing decisions based on values and principles.

Statistics:

  • 90% of global investors will revise their investments if companies do not consider ESG criteria within their business model.
  • Global natural disaster insured losses are estimated to be as high as US$42 billion for the first half of 2021.
  • More than half of U.S. regulators indicate that climate change is likely to have a "high impact or an extremely high impact" on coverage availability and underwriting assumptions.

Sources:

  • EY
  • United Nations Environment Programme Finance Initiative (UNEP FI)
  • Deloitte Center for Financial Services
  • SAP
  • Aon
  • "Insurance Regulator State of Climate Risks Survey"
  • Enterprise solutions from SAP, including climate change solutions, sustainability and ESG reporting solutions, circular economy solutions, and social responsibility solutions.