GFIA Annual Report 2022-2023

TRADE

Back to basics in a new world order

GFIA continues to promote trade liberalisation in the face of geopolitical tensions

By Brad Smith, chair of the GFIA Trade Working Group

The GFIA “Global protection gaps” study showed that to understand the new environment in which the global insurance industry operates we need to recognise that the world order is changing due to geopolitical tensions and their implications for food supply, fertilizer and — increasingly — energy production, strategic minerals and supply chains. Yet, despite the implications for insurance and the very high standard set by the Indonesian G20 presidency in 2022, the Indian presidency in 2023 largely excluded insurance from its policy recommendations. Nevertheless, we look forward to a strong G20 presidency in 2024 under Brazil, which will also lead the COP 30 climate summit in 2025.

Despite world leaders’ global lack of ability to reach a consensus on many topics, including extending further negotiations of multilateral trade rules and continuing progressive market liberalisation under the World Trade Organization, GFIA has continued to engage at global, regional and national level to remove barriers to free trade in insurance, reinsurance and pensions.

India and China encourage foreign insurers

Positively, the world’s largest markets by population — India and China — continue to welcome foreign insurers and have increased the ownership levels for companies positioned to go to the increased limits (74% in India and 100% in China).

The efforts by the Insurance Regulatory and Development Authority of India (IRDAI) to undertake reforms to increase access to insurance and insurance penetration by inviting new and increased foreign direct investment is an especially positive development. GFIA’s Trade Working Group hopes the IRDAI will accept its request for a regular conversation with foreign affiliated companies to discuss the changes and that the IRDAI will make the most of its efforts by removing disincentives to global companies to invest above 50% equity.

GFIA’s Trade Working Group has kept up-to-date on the reform proposals of the IRDAI, has offered to hold a virtual meeting with both the IRDAI and the International Financial Services Centre at Gift City, the Gujarat International Finance Tec-City, and has provided the IRDAI with a copy of the “Global protection gaps” study.

2023 has also seen notable agreements with numerous GFIA member markets by Indonesia on reinsurance, freedom from a domestic offer of first preference and recognition of global affiliates.

“GFIA’s trade policy is based on a global rules-based system of binding progressive trade liberalisation to support economic stability and growth and to avoid fragmentation risk.”

Localisation increases losses

GFIA also continues to engage with the OECD and the global development finance community to highlight the hard lessons that have already been learned that localisation of reinsurance creates an unacceptable potential for loss in an increasingly catastrophic world, which harms consumers and endangers market stability.

One of GFIA’s areas of activity in this regard has been to communicate with the government of Argentina in January 2023, seeking a return to regular authorisation of reinsurance premiums in hard currencies as written in contracts following a “temporary” set of restrictions. GFIA continues to engage on this in coordination with its regional colleagues at FIDES, the Interamerican Association of Insurance Companies, and with its counterparts at the AACS, the Argentinian insurance association. GFIA representatives from the American Property Casualty Insurance Association have repeatedly raised the issue with the International Monetary Fund and the OECD and recently advised on the new 25% tax on all cross-border reinsurance other than to a government-affiliated domestic company.

GFIA’s other main engagement on the localisation of reinsurance has been in Nepal in response to a request from the local industry association for global policy assistance, given its concern over full domestic retention by two local reinsurers. While Nepal is not a GFIA member, global insurers do have operations there, which this requirement puts at risk, along with denying business to global reinsurers. GFIA had previously engaged on this proposal when it was first made in 2020 and subsequently withdrawn.

To be in a solid position to undertake advocacy on members’ global priorities, GFIA continues to maintain strategic partnerships with global counterparts and broad industry organisations at the regional level through the sharing of information among GFIA members and our respective trade networks. The Trade Working Group represents a valuable forum for GFIA members to mobilise broader industry support when needed, especially on common risks that we face, such as in relation to data localisation and countries’ lack of compliance with international commitments.

Promoting strong international regulatory standards

“Localisation of reinsurance creates an unacceptable potential for loss in an increasingly catastrophic world.”

Looking ahead, geopolitical tensions are likely to continue to limit the ambition of many of our governments on trade policy because of national security and diplomatic priorities. As GFIA represents private risk-protection providers regulated by national independent prudential supervisors, much of our current lobbying against reinsurance and data localisation focuses on highlighting actions that are contrary to IAIS standards and drawing to the attention of local, regional and global policymakers the importance of strong international regulatory standards to protect all insurance consumers.

Both trade agreements and regulatory standards are fundamentally intended to prevent or discourage nations from making rash, unsound economic or policy changes that impact their commitments to neighbours, trade partners and foreign investors. GFIA can use its network of national associations to support regulators in remaining independent of political interference that conflicts with the rule of law, to which, as prudential supervisors, the members of the International Association of Insurance Supervisors are committed.

The working group will continue to actively respond to members’ requests for defensive support to prevent or reverse actions that are of concern to them. This will include paying special attention to governments’ proposals to violate contract sanctity and rule of law by retroactive implementation or outright conflicts of interest. GFIA’s trade policy is based on a global rules-based system of binding progressive trade liberalisation to support economic stability and growth and to avoid fragmentation risk. We look forward to another active year supporting global risk protection by our members.

“Much of our current lobbying … focuses on highlighting actions that are contrary to IAIS standards.”

Brad Smith

American Council of Life Insurers

Brad Smith

American Council of Life Insurers

Print version

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.