The second edition of ESG IN INSURANCE Conference took place in Vienna, organized by XPRIMM, with Vienna Insurance Group as official partner, and Reimpact-Re and IUC Group as partners.

In the beginning of the conference, the event’s moderator, Prof. Karel van HULLE, Professor, KU Leuven - Goethe University Frankfurt, Germany said: “We leave in a world where climate change has become a daily “occurrence”, no needing to be demonstrated. We are here to discuss about the role that insurers have to play not only in ESG terms, but as contributors to the larger concenpt of sustainable society.”
See bellow some of the most important statements:

KEYNOTE SPEECH

Petra HIELKEMA, Chairperson EIOPA

• We don’t need to focus on the negative news, although they are many and travel fast. In the last years the volume of damages caused by weather events increased by 2.5% per year. This and other evidence can come as overwhelming. What we need is to consider we can do something and get to work.
• We need to inform, incorporate, incentivize. We are putting a lot of effort in data collecting and computing, informing and providing access to data, as well as incorpoarting the lessons learned from this work in our policies and procedures aiming to supoort the insurance industry so that it may be able to fulfill its role in sustainability terms
• Insurers and pension funds are some of the most important institutional investors, managing assets of over 10 trillion euro. As such, their role in promoting green investments is instrumental.
• We should do reporting smarter, no more. Also, we need to find solutions not only share the risk, but also reducing it.

KEYNOTE SPEECH

Liane HIRNER, Chief Finance and Risk Officer, VIG - Vienna Insurance Group, Austria

To achieve sustainability g Extreme weather eventsoals, we need a shared commitment of our stakeholders

• Top 4 Global risks concern the environment. For European groups this even more concerning because Europe is the continent warming the fasterst and we are all feeling the impact
• In our view is very important to raise awareness about the climate risks and how people can get protection against the financial impact of these risks
• CSDDD Transition Plan – according to directive adopted this year has as objective the decarbonisation from a strategic perspective. On the other hand, the Solvency II Transition Plan’s objective is the decarbonisation from a risk perspective. So, we two interlinked transition plans with different perspectives have
• Vienna Insurance Group’s portfolio of green bonds reached 1,199 EUR mn.
• VIG supports an Engagement Process – Cooperation with ISS ESG, so that dialog takes precedence over exclusion
• Strenghtening risk literacy in CEE region is a part of VIG‘s social sustainability goals. According to Gallup, two-thirds of the population is not aware of the risks or are not believing the risks will materialize.

PANEL OF DISCUSSION: regulation, supervision, operations – the meeting point

Petra HIELKEMA, Chairperson EIOPA

• There is a strong need for companies to assume an active attitude towards sustainabily, not only in the “big things” as investing etc., but also in the simple things, as how their people travel, what resources are they using in their buildings etc.
• There is no need to reach a tsunami of regulation, although keeping regulations and standards “simple” is not easy.
• Politicians also need to understand that implementation takes time and resources, so if maybe the advancements in implementing new regulations are not so fast as desired, there not need for more regulation, but maybe for easing implementation.

Liane HIRNER, Chief Finance and Risk Officer, VIG - Vienna Insurance Group, Austria

• Dealing with the diversity withing the Groups may be challenging at times, inclusing in what ESG policies are concerned. But we have a lot of experience and we are also taking advantage of the fact the Groups is enough decentralized to allow a good adaptation to the local status and culture.
• Risk literacy is at least as important as financial literacy

Alexandru CIUNCAN, President & CEO, UNSAR, Romania

• Romanian seem pretty aware about the claimate change risks, but going from this relativelly high awareness to action still needs work
• Our association is striving to help Romanian insurers in their ESG orieted endeviours, but this ia work in progress
• It is important to stress out that clients are more and more interested about the sustainability profile of their financial services providers. Of course, we are or speaking about corporate clients. It will take probably more time until this approach will become common also for individuals
• We need to be optimistic, but we also need to be proportional.

Michael BRANDSTETTER, EU & International Affairs, VVO – Austrian Insurance Association, Austria

• Austrian large groups are still middle-sizes in a global framework, while small insurers are usually verry little, niche insurers. So, the green transition process is quite the same for all of them. However, all companies need to answers the same regulation, with similar implementation costs.
• There are still some issues of clarity of the regulations; we still struggle to reach the right interpretation.

LIVE INTERVIEW with Helena Viñes Fiestas, Commissioner of the Spanish Financial Markets Authority, Chair of the EU Platform on Sustainable Finance

• The EU Platform on Sustainable Finance is a stakeholders group with an advisory role for the European Commission and Parliament. We are working within 2 year madates, with concrete tasks.
• All members of the Platform are there on pro bono basis
• We believe the contribution of the financial sector is instrumental for the society as a whole o reach the transition goals
• It is very important to get the companies’ feed back on implementing regulations, and to use it for improving regulations and implementation plans. In fact only so regulators can know what works and what not in the “real” business worls

Klime POPOSKI, CEO, Winner-member of VIG and Professor at St. Kliment Ohridski University, North Macedonia

Sustainability and ESG regulatory landscape look in the CEET region

• There is a survey jointly conducted by the CEET section of IAIS, some academic professionals and representatives of the market players in the region. The aim of the survey: to assess the current status of the insurance regulations and/or initiatives promoting sustainable insurance growth in the CEET region.
• For the most countries of CEET region, ESG / sustainability agenda still an ambitious development challenge. 30 authorities from 27 CEET jurisdictions were invited to respond.
• Among the key findings: Insurance sector considerations of ESG issues and risks have still not gained momentum in the CEET region. According to the ESG regulatory / supervisory framework development, the CEET countries in this survey belong to different maturity stages. The role of insurance in achieving SDGs is not fully recognized and understood by supervisors. There is a need to develop and promote national sustainable finance strategies / roadmaps focused to financial sector contribution to SDGs. The perception of the materiality of E, S Limited resources, technical assistance, data and internal capabilities are the most relevant topics and pressing risks / challenges in setting supervisory priorities in the ESG domain.and G factors among supervisors is different, but there are aspects common regionally.
• According to the ESG regulatory/supervisory framework, the CEET countries in this survey can be grouped into three broad archetypes: established (some EU MS and Israel), advancing (other EU countries) and initiating (Western Balkans, Eastrens and Transcaucasian countries)
• 9 of 23 respondent supervisory authorities have in place quantitative criteria for the assessment of the impact of climate-related risks
• Running awareness-raising campaigns and events is seen as the most relevant non-regulatory action on ESG promotion.
• There is a need to develop and promote national sustainable finance strategies focused to financial sector contribution to SDGs.
• The role of insurance in achieving SDGs is not fully recognized and understood by supervisors.
• In setting supervisory priorities, authorities should give more attention to sustainable finance.
• The availability of high-quality ESG data is a constraint in setting supervisory strategies.

Michaella KOLLER, Director general, Insurance Europe (video recorded message)

• Focus on the role and contribution of the insurance sector, both as a provider of protection and major institutional investor
• Offer a forward-looking perspective on what could be done next (ie also with a view to the next EC/EP mandate) to help address the current challenges faced
• European insurers are strongly supporting the ESG goals.
• Given their role as underwriters and investors insurers may hold a very important role in buiding sustainability
• Undertaking risk, bul also buiding awareness and incentivizing responsible behaviour of their clients are all means of contribution to ESG goal
• Insurance industry is clearly contributing to ESG, but it cannot be alone in this endeavour. All stakeholders need to contribute. As investors, we need more investment opportinities and  better regulatory approach towards insurers’ long-term investments.

Matti LEPPÄLÄ, Secretary General/CEO, PensionaEurope

• Pension funds as providers of retirement income and as institutional investors
• Reflections on the present situation and future outlook.
• The retirement income for most Europeans is based on social security and this may be a huge challenge in the not a too far future. Lacking an adquate retirement income is likely a significant risk already. As such, people need to save more and sooner, and pensions funds have a significant role in this area.
• There is an important change of landscape in the pensions area, from Defined Benefits to Defined Contributions. This change will solve a range of issues existing with underfunded pension funds, but will also raise new challenges.
• Pension funds are big institutional investors tht cannot stay outside the systemis risks in their financial markets. The requirement to consider ESG goals in PFs own investments. For PF the authonomy of the investments is important, as well as right consideration of the long-term character of their investments.
• Sustainability reporting is still somehow challenging is some aspects.
• The new legislation wave is also challenging, especially for the small PF, not to talk about the inconsistency between different piexes of regulation.

Morgane HILLEBRANDT, Senior Financial Analyst, AM Best, Netherlands        

ESG best practices and strategies in insurers’ investments

• There are several approaches to ESG Incorporation in investing activities: Screening (i.e., exclusions); ESG integration; Thematic investment; Engagement; Voting
• The most challenging aspects for the ESG incorporating in investments are the competition for limited pool of sustainable investments and, on the other hand, the fact that the assets with strong ESG ratingsare not necessarily of the better credit quality. The main opportunity is achieving of combination of return, risk mitigation and sustainability objective
• Some ESG Rating Factors are: Weather-related events (including the stress testing capabilities and non-modelled risks) are a key driver leading to the credit rating action; Environmental risks are a key driver leading to the credit rating action Reputational risks stemming from environmental, social or governance factors are the key elements leading to the credit rating action.

PANEL OF DISCUSSIONS: Investing in ESG

Matti LEPPÄLÄ, Secretary General/CEO, PensionaEurope

• Pension funds’ primary duty is to provide good returns for their members; aligning to ESG goals are not a regulatory “must” for PFs , but they are for sure considered. The challenge is the availabily of reliable data that you need for sound investments.

Andrea PORTA, Financial Analyst, AM Best, Netherlands

• AM Best incorporates ESG factors in its analysis when asigning ratings, but doesn’t actually issue ESG ratings
• The ESG rating framework is still evolving and there are still several thigs that need clarification (as transparency considerations, management of conflicts of interest etc.)
• The credit rating process is a interactive one; the agency’s analists have access to non-public data and are basign their rating decisions on very indepth information.
• As of now, there is a lack of uniform methodology, which means that the ESG rating agencies use differen methologies and therefore their ratings are not comparable.

Klime POPOSKI, CEO, Winner-member of VIG and Professor at St. Kliment Ohridski University, North Macedonia

• The investment policy in the non-EU insurance markets is driven by the regulations; although it is a growing recognition of the ESG issues, there is still a strong regulatory framework regarding the different investment classes – in particular in the countries still using Solvency I

KEYNOTE SPEECH

Özgür OBALI, General Secretary of Insurance Companies Association (TSB), Türkiye

ESG in Turkish insurance

• Environmental, social and governance (ESG) refers to a collection of corporate performance evaluation criteria that assess the robustness of a company's governance mechanisms and its ability to effectively manage its environmental and social impacts.
• ESG developments in Türkiye include sustainable energy investments, strategy to combat climate change, sustainable transportation projects, forest and water resources protection studies, environmental audit and regulations etc.
• Turkish insurers are seriously considering sustainability issues. 45% of the TSB members take ESG criteria into consideration when choosing their suppliers, while 55% carry out product development activities that are recyclable, environmentally friendly, health-friendly and support energy efficiency. 64% of TSB members keep records of energy and water consumption amounts and 63% use energy-saving data center designs, cooling optimization of data centers and environmentally friendly cooling systems
• Green Transformation and ESG criteria offer not only a responsibility, but also an opportunity to create long-term success and social value. Not only the insurance sector, but all sectors must be determined to lead in this field and for a sustainable future. In this context, in parallel with the developments in the world, we attach importance to sustainability in our country, both as the insurance sector and as the Association, and we continue to work on this issue.

Doris PÖPPLEIN, Sustainability Markets Lead, Swiss Re, Switzerland

Dr. Annina ANGSTMANN, Solutions Sales Director P&C, Swiss Re, Switzerland

The role of re/insurance in enhancing disaster risk resilience

• 2023 – another year of unfortunately negative records for nat cat losses; although is was a rather benign year iro severity losses (no major hurricane event, Turkey/Syria EQ low insurance penetration), still Nat Cat losses of $108bn, more than 100bn in the fourth consecutive year
• protection gap - 62% of global nat cat losses uninsured
• Global natural catastrophe insured losses have grown at a much faster rate than the global economy. In inflation-adjusted terms, on average insured losses from natural catastrophes were up 5.9% per annum in the period 1994–2023. Meanwhile, global GDP was up 2.7% in the same period. In other words, over the last 30 years, the relative loss burden compared to GDP has more than doubled.
• For the future – we expect annual insured losses will grow by 5-7% over the long term, similar to actual loss increase over the last 30 years.
• What can re/insurers do to address climate resilience and address availability, accessibility and affordability of insurance cover? Pre-Event Measures– retrofitting, time component, amortization, reduced premium, peace of mind of insured, economic dividend 2:1 to 10:1; Poste Event Measures – example build back better,
• Nature Based Solutions – nature providing ecosystem services
• Swiss Re solutions include pre-event insights (current exposure to natural hazards and climate risk scores) and event management (Rapid Damage Assessment NatCat claims management)
• Swiss Re developed Climate Risk Scores, which allow to make climate change tangible under various GHG emission scenarios for the decades until 2100. The scores basically reflect the change at a location relative to today in comparison to all locations' changes globally.

Leonardo MEOLI, Head of Sustainability Business Integration, Generali Group, Italy

Doing well by doing good", Generali commitment to sustainability and boost “just transition” among European’s SMEs

• Small and medium-sized companies make a vital contribution to economic growth, social stability and innovation.
• 99.8% of businesses in the European Union are SMEs; 65% of all private sector employees work in SMEs; 52% of the EU27 non-financial business sector added value is produced by SMEs
• Through SDA Bocconi University, more than 1200 SMEs were surveyed in 9 European Countries. The survey shows that the sustainable transition of European SMEs remains robust, despite the challenges (such as the post-pandemic recovery, inflation, rising energy costs,and Russia’s war on Ukraine) faced by SMEs over recent years. 37% of the SMEs have an already implemented or soon to be implemented ESG strategy
• SMEs ask for access to more favorable credit conditions tied to ESG ambitions, SME-targeted public incentives, and a boost for sustainable products and services.
• Since last year, the percentage of European SMEs perceiving significant barriers hindering their sustainable transition has risen across various domains.

Menekse UCAROGLU, CEO, IUC Group

Reducing the protection gap in a hardening reinsurance market

• The Maraş earthquake left behind not only unprecedented losses, but also useful lessons for the insurance industry
• TCIP has taken a major transformation step to include all other types of natural disasters, especially floods, within the scope of TCIP.  We wait the transformation of Compulsory Earthquake Insurance into Compulsory Disaster Insurance in the second half of 2024. Coverage will be provided for all natural disasters through a single policy.
• Earthquake has resulted in increased reinsurance costs and a very “radical tightening” 
• Türkiye had significant inflation and a weakening currency last 3 year with the hardening of reinsurance market,
• The deterioration of Turkey’s economy “meaningfully increased the asset and underwriting risks of many re/insurers
• CAT capacity was 50% to 100 % more expensive then 2023.
• We had the most challenging renewal faced by Turkish insurers in a generation
• Some reinsurers stopped providing capacity for proportional treaties. Others completely left the market, so that insurance companies lost some part of their reinsurance pannel,
• Despite the fact that for many years the Turkish market was profitable, the latest developments changed all the equilibrium. After increasing for 5 consecutive years their shares in treaties, hardly leaving any room for new comers. When leaving the market, some of them are replaced by lower rated reinsurers who see this as an opportunity to enter the market

Tom JOHANSMEYER, Global Head of Index Classes, Inver Re

Real ESG in reinsurance    

• The increased analytical burden associated with ESG features in traditional and alternative reinsurance transactions is seen as an added frictional cost
• Further, ESG-friendly regions (eg, Africa, LatAm, SE Asia) tend to be perceived as higher-risk and lower-ROL … a difficult combination for any deal
• Successful ESG reinsurance has to be native to the transaction, diversifying but not di-worse-ifying, value-accretive to the book/portfolio, neutral as to peripheral risk (eg, political risk, local economic and societal risk)
• ESG deals have quietly found a foothold across the global reinsurance industry
• Where the rate is sufficient and the structure sensible, reinsurers and ILS managers have flocked to transactions that are natively ESG-friendly
• Larger and more sophisticated markets are ready and eager to deploy to new and developing markets using alternative instruments and structures
• Larger and more developed capacity providers have better opportunity to take advantage of diversification and tend to be more resourced for the necessary analysis
• This requires a more disciplined and structured approach, but it also enables scalable, long-term solutions
• Capacity providers for the case studies came from major European and Bermuda markets (traditional and ILS

Sinisa LOVRINCEVIC, CEO, REIMPACT Re Ltd, Insurance and Reinsurance Broker

Sustainable Governance for Reinsurance Underwriting Resilience

• The global risk landscape is evolving – risks are more complex and interconnected
• There is a lot of need for prudent risk management & proper underwriting discipline
• Profitable sustainability is necessary
• Sometimes reality may be presenting us a quite surprising picture – for example, the huge floods in slovenia last year: 9.5 bn euro economic losses, some 500 mn insured losses – all this in a country with AA S&Ps rating and where two major re/insurance grups are domiciled

 

PANEL OF DISCUSSIONS: Role of reinsurance in reducing the protection gap  

Gerald KLEMENSICH, Head of Reinsurance dept., VIG, Austria

• If I am looking to my 25 years experience in reinsurance, it seems nobody is there to more. Some things seem to not change ever and the protection gap, at least in region where VIG operates, is still very important
• In many cases the overall approach of the government towards the nat cat situations is actually descouraging insurance take-up (uninsured homeowners have higher benefits than those insured).

Leonardo MEOLI, Head of Sustainability Business Integration, Generali Group, Italy

• We are in a moment in the history when sustainability is more important than ever
• In my group I see as a chellenge that, operating on a global scale, we are facing a huge diversity and we would need somebody to level the playing field

Nicoleta RADU, CEO, PAID Romania

• To reach a certain level of resilience and sustainability in the absence of proper financing is not possible.
• The houseinsurance systems in Romanian – we have only about 21% of homes insured for natcat risks.
• We have constantly worked to increase the coverage degree. Lastly, a lot of our efforts have been directed towards improving the legislation
• Currently, PAID has an exposure of 40 billion euro and we lately getting proper reinsurance became challenging, especially as the mandatory insurance we are providing has a fixed tariff, so we cannot affort a significant increase in the reinsurance cost.
• We are increasing data granularity to reach better modelling, we are also exploring alternative reinsurance solutions, so that we can compensate for the difficult reinsurance market

Menekse UCAROGLU, CEO, IUC Group

• Turkyie has several pools that are dealing with natcat – TARSIM for agricultural insurance, TCIP for home earthquake insurance – now expanding to include other risks too
• Easthquake mandatory insurance penetration has reached about 55%