GFIA Annual Report 2023-2024

Anti-money laundering

Preventing financial crime

Combatting the global challenge of money laundering in insurance

By John Huff, chair of the GFIA’s Anti-Money Laundering and Counter Terrorism Financing Working Group

The United Nations Office on Drugs and Crime estimates the amount of money laundered globally in any one year is between 2% and 5% of global gross domestic product. The clandestine nature of these activities inevitably makes it difficult to quantify with accuracy; however, the UN’s estimate indicates the vast scale of the challenge for financial system gatekeepers seeking to block the cycling of dirty money.

While GFIA believes the insurance sector has low risk exposure – relative to banking and crypto assets, for example – the industry is nevertheless committed to meeting the highest international standards on anti-money laundering and countering terrorism financing (AML/CTF).

Between 2% and 5% of global GDP is laundered each year

Collaboration with FATF

To meet these high standards, GFIA is proactive in information exchanges with the AML/CTF global watchdog and standard-setting body, the Financial Action Task Force (FATF). Money-laundering techniques are constantly evolving and FATF’s monitoring of how criminals and terrorists raise, use and move funds, and guidance on standards designed to meet new threats, informs the policies and actions of public and private sectors alike in efforts to thwart illicit activities.

Dialogue between FATF and individual industries is helpful in identifying and addressing specific money laundering (ML), terrorism financing (TF) and proliferation financing (PF) risks. In July 2024, GFIA’s Anti-Money Laundering and Counter Terrorism Financing Working Group welcomed the opportunity to provide an insurance industry perspective in the FATF public consultation on updating guidance to National Risk Assessments (NRAs).

“Dialogue between FATF and individual industries is helpful in identifying and addressing specific money laundering, terrorism financing and proliferation financing risks.”

Key insurance sector messages

Among the key messages of the Working Group’s response were:

Policymakers should follow the risk-based approach promoted by FATF on guidance regarding AML.
Any new rules to fight ML/TF should consider covering only life insurance, where risks exist, even though they are very low, whereas risks in the property and casualty (P&C) and reinsurance sectors, in particular, are negligible.
NRAs help insurance industry participants to assess their own ML and TF risks, however in some assessments risk profiling of insurance needs to be more comprehensive in order to assist various sectors of the industry to assess their specific risks.
Horizon scanning of emerging risks would be helpful.
Case studies should be shared to enable industry to learn from real-world situations and to design effective preventative measures.
Face-to-face meetings with industry and focused consultation can help the private sector to provide more valuable feedback on NRA findings.
As part of the evaluation results, regulators should be invited to align Level 2 texts to avoid creating inconsistencies and potential legal uncertainties.

Supporting the goals of the IAIS Financial Crime Forum

Part of GFIA’s mission is to promote international dialogue among national and regional insurance associations on issues of common interest. One way in which the AML/CTF Working Group contributes to this is through engagement with the International Association of Insurance Supervisors (IAIS) Financial Crime Forum.

Subject matter experts within the IAIS share insights and discuss developments in the areas of countering ML, TF and PF, and fraud in insurance, with the goal of enabling greater understanding and insight into the impact on insurance supervision.

In their December 2023 discussion, the IAIS Financial Crime Forum shared its Application Paper on Combating Money Laundering and Terrorist Financing with the AML/CTF Working Group. This provided general context on key aspects and standard-setters in the global AML/CFT arena, and invited feedback from GFIA member associations.

Identifying and combatting financial crimes

The AML/CTF Working Group will continue to spearhead GFIA’s work to identify any risk exposures in the insurance industry, and to provide input to regulators to advocate standards and policies that are fit for purpose, while being both proportionate to those risks and workable for insurers.

At the same time, GFIA will also strive to identify and combat other financial crimes such as those related to fraud, political corruption and violations of government-imposed sanctions. It is in the interests of our industry to remain vigilant on this front.

John Huff

The Association of Bermuda Insurers and Reinsurers

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.