GFIA Annual Report 2021-2022

CLIMATE RISKS

Two elements

GFIA strengthens cooperation with international bodies and expresses strong positions on supervisory approaches to climate risk and sustainability reporting

By Christian Pierotti, chair of the GFIA Climate Risks Working Group

Building on a fruitful end to 2021, especially the webinar that was broadcast during the November 2021 COP26 UN climate conference, the Climate Risks Working Group continues to hold exchanges with international stakeholders on climate-related issues. Its aim is to bring to their attention the positions, actions, commitments and concerns of the global insurance industry, as well as to foster dialogue at international level.

GFIA compiled information about various natural disaster insurance schemes across the world to better understand the differences between them and to inform the debate on enhancing climate resilience. The charts, published in the context of GFIA’s engagement at COP26, provide information on a number of markets, including data on coverage and market penetration for selected natural catastrophe risks for both individual and commercial insurance lines.

Soon after the COP26 activities, in December 2021, the Working Group invited the Cambridge Institute for Sustainability Leadership, an interdisciplinary institute that develops solutions for a sustainable economy at the University of Cambridge, for a conversation about its report, “Risk Sharing in the Climate Emergency: Financial regulation for a resilient, net zero, just transition”, which called on policymakers, financial and climate authorities and financial sector players to take action to support the transition. In terms of the insurance sector, it called for insurers to become pioneers of climate-related disclosures, prudential supervision and climate stewardship.

And the Working Group started 2022 through engagement with the newly established Climate Risk Steering Group of the International Association of Insurance Supervisors (IAIS). It contributed to the IAIS’s work on climate-related scenario analyses by sharing the expectations that the global insurance sector has of insurance supervisors. The Working Group also shared inputs on potential data elements to be added to the Global Monitoring Exercise, which is the IAIS framework for monitoring potential systemic risk in the global insurance sector.

Given the OECD’s work on sustainability-related issues, GFIA organised a meeting with its Climate Adaptation Finance and Investment Program in April 2022. This was a great opportunity for the Working Group to learn more about the OECD framework on climate-resilient finance and investment and about its forthcoming work on climate adaptation.

On the occasion of COP27 in November 2022, GFIA published a statement calling for collective action to prevent loss of life and reduce economic losses from future natural disasters. The statement reiterated (re)insurers’ determination to put their experience, commitment and assets at the service of the ecological transition, to help close the protection gap and to help build a more resilient society.

GFIA’s COP26 webinar: “The global insurance industry — a key partner in creating more sustainable and resilient societies”

“There is no practical evidence that insurers are exposed to systemic risks from climate change.”

No systemic risk from climate change

In June 2022, GFIA submitted comments to the Financial Stability Board’s consultation on supervisory and regulatory approaches to climate-related risks. GFIA welcomed the intent of the Financial Stability Board’s Interim Report, which is to provide guidance to cross-sectoral supervisors in order to avoid standards in different jurisdictions that are duplicative or contradictory and to facilitate the assessment of material climate-related risks, which is still at an early stage of development.

GFIA highlighted that there is no practical evidence that would justify concluding that insurers are exposed to systemic risks from climate change. Since the effects of climate change materialise over time, insurers are able to adjust their policies, underwriting, pricing and decisions on whether to cover a risk.

Support for global baseline for sustainability reporting

Throughout the year, several jurisdictions worldwide have individually stepped up their efforts on sustainability reporting. The IFRS Foundation Trustees launched an International Sustainability Standards Board (ISSB) during COP26 and aimed to accelerate the convergence of global sustainability reporting standards focusing on enterprise value.

GFIA’s Climate Risks Working Group thus seized the opportunity to build a strong common position on this issue. It supports the ISSB’s objective of creating a global baseline for sustainability reporting on which individual jurisdictions can build, when necessary, through a “building blocks” approach. It is essential that this global baseline is developed through cooperation with relevant jurisdictions. GFIA also provided recommendations to the ISSB that will strengthen the design of the disclosure requirements in order to create a consistent framework that will provide manageable, intelligible and comparable sustainability information.

Christian Pierotti

France Assureurs

Christian Pierotti

France Assureurs

Awareness-raising campaigns

Insurers across Europe are involved in a broad range of awareness-raising campaigns. For instance, in Germany, risk-awareness campaigns are implemented jointly by state authorities, consumer protection organisations, the insurance industry, architects and other stakeholders. Their collaboration is built around a common goal: to raise awareness of the effects of climate change and natural hazards, of the benefits of loss prevention, and of best practices as regards natural catastrophe-resilient buildings. The high level of risk awareness in Germany is one of the reasons for the relatively low protection gap; indeed, the insurance penetration rate for natural perils such as storm or hail is more than 90%.
Most European insurance associations have initiatives to raise risk awareness, such as dedicated workshops, events and educational seminars, as well as frequent in-depth articles, themed newsletters, presentations and other publications.
Many French insurers have launched prevention campaigns and also support the campaigns of “Assurance Prévention”, an association founded by the French insurance association (France Assureurs). Assurance Prévention has produced numerous leaflets, infographics, quizzes, etc. to raise awareness of natural risks. Through its initiatives, it aims to develop a “culture of risk prevention” among students and teachers.

The Greek insurance association (HAIC) launched a digital awareness campaign — “Better to know than to think you know” — to provide consumers with useful information about private insurance and to set the record straight on some misperceptions. The campaign consists of six videos to educate the public about how private insurance works. Most of the videos emphasise the need for resilience in the face of natcat risks and the role of insurers in protecting private property. The videos are hosted on the interactive iknow-insurance.gr platform, which allows visitors to do a short quiz to test their knowledge of private insurance and then obtain additional information.
Insurance Sweden is currently working with its members on a common methodology for calculating carbon dioxide emissions during building repairs. The aim is to raise awareness of the impact on CO2 emissions of rebuilding after fire or water damage, and thus of the importance, from that perspective as well, of preventing such damages.
Insurance Sweden published a statistical report in October 2021 on how different municipalities and regions have been affected by damage caused by flooding, storm and fire.
Spotlighting the central role of municipalities in climate-change adaptation, Insurance Sweden ranks Swedish municipalities according to their adaptation work. The methodology is based on the European Commission’s Adaption Support Tool (2013). The ranking is released every other year, the June 2021 version is available here.
UNESPA, the Spanish insurance association, launched a dedicated website in October 2021 — “Naturalmente Protegidos” (Naturally protected) to explain how natcat insurance works in Spain. It focuses on 10 different risks (rain, flood, wind, drought, frost, hail, snow, earthquake, volcanic eruption and lightning) and details for each how insurance covers property, life, harvests and livestock. The website illustrates the success of the Spanish public-private natcat insurance model. It was jointly developed by private insurers (UNESPA), the Consorcio de Compensación de Seguros (CCS) government scheme and Agroseguro, Spain’s agricultural insurance system, and was launched within the framework of Estamos Seguros, UNESPA’s financial education campaign (running since 2016).
In collaboration with CEPYME, the Spanish confederation of SMEs, UNESPA launched in October 2020 “Prevenir para crecer” (Prevent to grow), a website with information on insurance for SMEs. The website highlights potential risks to which SMEs are exposed, including natcat-related risks, and provides advice on how to prevent them.
Insurance Ireland, the Irish insurance association, and a number of Irish insurers have launched consumer blogs and information repositories on their websites to share useful information with consumers about responsible and ESG investing.

Education

The European insurance industry works to increase financial literacy in relation to risk awareness, insurance protection and long-term savings:

The Croatian Insurance Bureau (HUO) launched a first educational project in 2009, “Financial literacy in the Republic of Croatia”, which was followed by a range of educational activities, often implemented jointly with independent insurers. One of these activities, “Safer Tomorrow”, was initiated in 2021, and aims to raise citizens’ awareness of the benefits of insurance. Within the framework of the project, HUO launched several videos and infographics, some of which specifically target young people.
The HUO organises a yearly competition for the best scientific paper, the best graduate thesis and the best undergraduate thesis in the field of insurance. HUO also publishes the “Croatian magazine for INSURANCE”, a scientific journal for professionals to advance good practice in the sector. Finally, some insurers in Croatia created a colouring book for children to promote financial literacy at a young age in a fun and simple way.
In Italy, the ANIA Academy, together with CeTIF (Research Centre on Technologies, Innovation and Finance of the Università Cattolica del Sacro Cuore), launched the second edition (2022) of the 2nd level master’s in insurance management to train professionals and enable them to respond to the challenges of the “new normal”.
ANIA is also collaborating with LUISS Business School to develop a major course in insurance management as part of its Executive Master in Financial Management.
Insurance Europe produces information for consumers as part of its “InsureWisely” financial education initiative. This includes one-pagers on different insurance topics, including how to limit the effects of natural catastrophes.
The French insurance association (France Assureurs) developed a series of educational booklets within the framework of EDUCFI (the French national strategy for economic, budgetary, and financial education), an initiative launched by the French Central Bank. These booklets help users to better understand how insurance works and what insurance products do and do not cover.
The Spanish insurance association (UNESPA) set up a financial education programme for schools, “El Riesgo y Yo” (“The Risk and I”). It involves 40 insurance undertakings and 164 volunteers and aims to give 2 500 teenage school students basic financial knowledge and insights into risk management.