New opportunities for Russian insurers in ESG

14 September 2021 — XPRIMM
New opportunities for Russian insurers in ESG
ESG and sustainability have gained huge attention within Russian media and politics in recent months.

In no small part triggered by President Putin declaring environmental and climate concerns to be a national priority for the first time in April, the government were tasked with developing a plan to decarbonize the Russian economy by 2050 just one month later. In July, a new law was enforced, making the disclosure of factual emission levels by major polluters mandatory.

All three were significant developments for insurers in Russia and CIS, since the sector - and GDP growth - remains strongly connected with sources such as thermal energy, oil and gas. But while the transformation to a "green" economy might come with its challenges, it also presents a whole range of new opportunities for forward-thinking insurers.

Opportunities aplenty in green energy

We have already seen a number of insurers developing green energy insurance products in countries such as Russia, Ukraine and Kazakhstan. These include in areas such as parametric solutions for Windparks and Solar energy.

In terms of decarbonization, insurers can now access technology which enables them to benchmark their portfolio in regard to CO2 emissions and obtain a detailed impact assessment of CO2 politics on their insurance book. In doing so, firms can get a better understanding of their transition risk linked to decarbonization strategies. The challenge for insurers is often how to identify weak points in their portfolio composition. Translating different decarbonization scenarios to their premium impact per line of business and a comparison to relevant benchmarks like their competitors or the overall market can help insurers and to develop a go-to-market strategy.

Looking further afield

But the opportunities to expand an insurer's role in sustainability goes way beyond green energy.

From a liability perspective, more and more Russian insurers are looking into environmental damage products. E.g. one insurer launched a program providing comprehensive compensation for damage to life, health, property of third parties and harm to the environment directly. New Russian legislation also fosters this line of business.

Reinsurers can also play a role in supporting the development of these products through bringing their international experience and expertise from other markets.

There are also manifold ways to expand sustainability within motor, with the coverage of electric vehicles being a prime example. For example, we are currently working with insurers to adapt the tariff to e-vehicles - aspects such as the use of driver assistance systems, as well as electric vehicle specific factors such as high weight and battery, are key consideration factors in this process.

On the other hand, there is also potential to build additional coverages for electric vehicles - for example offering warranties for batteries beyond the time frame offered by the manufacturer, as well as coverage for things like cables, wallboxes and battery disposal costs.

Last but not least, insurers can also have a positive green impact via Telematics policies, as these incentivize customers to drive more smoothly and ultimately more fuel efficiently.

Fostering sustainability outside your own organization

Every company can contribute to a more sustainable society by steering their own processes and investments into a more sustainable direction. But outside of their own organization, insurers can help drive ecological trends by developing "green products" or offering incentives to their customer. A good example of this is offering incentives to customers making strides in this area, for example upgrading an existing coal-fired power plant with the installation of new filters that reduce CO2 emissions.

Besides ecology, we cannot forget that a comprehensive ESG strategy also embraces social aspects. Insurers have the power not only to mitigate climate risk and advance the energy transition, but also to build societal resilience by driving affordable insurance protection with digital solutions to make insurance access easier for everyone.

Several Russian insurers have already begun to embrace digitization as a means of developing innovative new insurance products. Sharing economy, increased insurance penetration by online sales, the demand for protection against flood events and other natural catastrophes are just a few out of places where there is room for innovation here.

In seeking to insure and operate in ways that tackle sustainability challenges, Russian insurers have a vital opportunity to drive long-term value for them and their clients.

*(Environmental, social and governance)

Author: Gepa Jansen-Klaus, Operational Leader Team Russia & CIS, Swiss Re Europe S.A.

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