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March 23, 2022 Thomas Spiller
Welcome to our ESG roundup, keeping you up to date on the insurance industry’s most significant ESG-related news. The focus this month: the IPCC report and insurance in Russia.
Read our summary and analysis below.
IPCC call for adaptation
Bermuda Risk Summit
Growing strategies to protect the most vulnerable
ESG governance
- March launches ESG rating tool (The Insurer – subscription required)
- Carnegie-Brown: Market must take “tough decisions” on climate laggards (The Insurer – subscription required)
- SEC unveils proposed climate disclosure rules (Reuters)
- Framework published for TCFD-style nature disclosures (Investment Week)
ESG commitments
Litigation against the UK Government
Insurers response to Russia’s invasion of Ukraine
IPCC report and insurance in Russia
This past month has seen countless multinational corporations across industries pull out of the Russian market in protest of the invasion of Ukraine. Insurance is no different. Insurance is no different, and something we touch on in one of our recent blog posts:
“Yale School of Management is updating a list of corporations’ responses and identifies 400 companies that have now suspended or reduced operations in Russia. Companies on the list include MMC (“Withdrawn”), Generali (“Suspended”) and Allianz (“Scaling back”). Some companies, such as Aon and WTW that should be on the list had not been spotted by the Yale team at the time of writing, having announced their departure from the Russian market.”
This raises the question, what is the ethical ESG-led position for reinsurers and multinational insurers with business in Russia? And what is the impact on employees in the region? Will companies react quickly like Zurich who have already ceased writing new business in Russia or drag their feet – something which will no doubt be on executives’ minds as the situation develops.
The past month also saw the most recent report from the Intergovernmental Panel on Climate Change published, titled ‘Climate Change 2022: Impacts, Adaptation and Vulnerability’. The report looks at the alarming impact of climate change on human societies, the associated vulnerabilities, and our capacity to adapt. For those unable to read the 3675 pages, we summarise the implications of the IPCC report for insurers in our recent blog post: the importance of helping both tackle the protection gap for those most vulnerable to the impact of climate change and building resilience against the impact of increasing climate risk.
If you would like to discuss any of the issues raised in this email, such as how to push forward your ESG agenda or navigate these emerging ESG trends, please get in touch.
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European (re)insurers agree adaptation is vital to ensure climate resilience (Reinsurance News)
As discussed in our blog (found here), the recent Intergovernmental Panel on Climate Change (IPCC) calls for global adaptation to reduce the impacts of climate change on human societies. (Re)insurers in Europe have announced their support for the report and are currently exploring their key role in accelerating the adaptation to a resilient future. In response to the call for public-private relationships, (re)insurers have begun cooperating with public authorities at national, regional, and local level to support adaptation.
Sold out Bermuda Risk Summit hailed great success (business wire)
Bermuda hosted their first Risk Summit this month, selling out with 350 delegates in attendance. The summit included: a global CEO Panel; a presentation on terrorism risk; panels featuring ratings agencies, brokers, life and a presentation on the upcoming ESG benchmarking survey being conducted by BDA and Oxbow Partners led by Miqdaad Versi, Head of ESG at Oxbow Partners.
Yokahu building local partnerships to strengthen Caribbean resilience (The Insurer – subscription required)
Yokahu, a parametric insurance start-up, is working to provide insurance to hurricane-exposed vulnerable communities in the Caribbean. The insurance product allows customers to select their own cover correlated to the central pressure of hurricanes. The product is affordable, helping to bridge the protection gap and following a hurricane it will rapidly inject sufficient capital at the bottom of the economy, helping to restart the economy faster.
The Lemonade Foundation turns to blockchain to protect subsistence farmers from climate change (business wire)
Lemonade’s nonprofit foundation, The Lemonade Foundation, announced this week the formation of the Lemonade Crypto Climate Coalition. The coalitions stated goal is to offer climate insurance to the world’s most vulnerable farmers. The coalition will utilise architecture from Avalance, an eco-friendly proof-of-stake blockchain. The architecture will allow for Farmers to make and receive payments using their phone. An initial rollout in Africa is expected within the year.
March launches ESG rating tool (The Insurer – subscription required)
Marsh announced the launch of their new ESG Risk Rating tool that measures their clients performance against more than 10 internationally recognised standards and frameworks. The tool will measure performance across 18 themes, providing an overall risk score. Results can be shared with external stakeholders as part of the procurement process.
Carnegie-Brown: Market must take “tough decisions” on climate laggards (The Insurer – subscription required)
Lloyd’s of London Chairman Bruce Carnegie-Brown believes (re)insurance markets will need to make tough decisions to pull support from clients unable or unwilling to transition to net zero. According to Carnegie-Brown, Lloyd’s has taken steps to guide the market in its approach to climate risk, noting the importance of avoiding a “cliff edge”, excluding large parts of the UK economy. Late last year Lloyd’s piloted a measurement framework to monitor syndicates’ carbon underwriting progress towards the 2050 net zero target.
SEC unveils proposed climate disclosure rules (Reuters)
The U.S. Securities and Exchange Commission (SEC) announced the release of proposals for U.S. public companies to disclose a range of climate-related risks and greenhouse gas emissions. This is the first time U.S. companies have been required to provide information on climate risks faced, and their plans to address them, along with metrics detailing the companies’ climate footprint. Forming part of President Joe Biden’s push to join global efforts to avert climate-related catastrophes.
Framework published for TCFD-style nature disclosures (Investment Week)
The Taskforce on Nature Related Financial Disclosures (TNFD) has released a beta version of its framework for industry feedback. The TNFD supported by the United Nations, was announced last year as a follow up the Taskforce on Climate-related Financial Disclosures. The TNFD comprises three key components: 1. An outline of fundamental concepts and definitions associated with assessment and disclosure of nature related risks and opportunities; 2. Draft disclosure recommendations for nature related risks and recommendations; 3. Guidance for corporates and financial institutions to incorporate nature related risks and opportunities assessment into strategy and risk management processes.
ESG engagement accelerates among US insurers (Insider Engage)
US insurer interest in integrating ESG factors into investment strategies has grown significantly, according to a recent poll by global insurance asset management firm, Conning. The poll found that 79% of respondents began to include ESG in investment considerations in the last 2 years – with corporate reputation a key driver (92% rating either “important” or “very important”). The US has been slower to adapt than Europe or Asia, with 67% of respondents incorporating ESG targets only last year (2021).
AIG commits to net-zero investment portfolio (ESG Today)
Global insurance firm American International Group (AIG) recently announced a series of new sustainability commitments and plans to significantly reduce coal and oil sands underwriting exposure. These commitments are designed to help AIG reach their overarching commitment of net-zero greenhouse gas (GHG) emissions across its global underwriting and investment portfolios by 2050. Peter Zaffino, Chairman & CEO, believes “AIG can be a catalyst for positive change” through its “sustainability advancements and renewable energy expansion”.
PartnerRe 2021 environmental, social, governance (ESG) report (PartnerRe)
PartnerRe has released its 2021 ESG report. PartnerRe defined four ESG goals as part of the policy: 1. Good business conduct, ethic, and governance; 2. Managing the impact of climate change across liabilities, assets, and corporate operations to build global resilience; 3. Community support and wellness; and 4. Diversity and inclusion.
Argo Group ESG report 2022 (Argo Group)
Argo group recently published their 2022 ESG report, that emphasises the positive impacts they have had over the past year. Highlighted by an 80% reduction in indirect greenhouse gas emissions, 941 pieces of technology donated to non-profits and 47.5% of US employees able to work remotely. Argo use six factors to assess their ESG impacts on operations: 1. Environmental, 2. Financial, 3. Responsible Business (e.g. governance, investment), 4. Human Capital (e.g. D&I, wellness), 5. Community & Partnerships, and 6. ESG business solutions (e.g. responsible underwriting, innovation, speciality services).
Zurich releases 2021 sustainability report (Zurich)
Zurich this month released their 2021 sustainability report, outlining how they intend to be one of the world’s most responsible and impactful businesses. The report details their sustainability framework which focuses on three pillars: 1.5 degree future, work sustainability, and building confidence in a digital society.
ClientEarth takes UK government to court over its net-zero strategy (The Insurer – subscription required)
Along with Friends of the Earth and Good Law Project, the environmental charity ClientEarth has been granted permission to sue the UK Government over its inadequate net-zero strategy. ClientEarth argues the Government has failed to set out sufficient policies to tackle climate change and reach net-zero emissions by 2050. The government has been accused of relying too much on future technology with little immediate action. Insurers setting net-zero strategies in line with the UK government’s approach will need to consider whether this will be enough to meet their goals, and whether they too are also at risk of litigation.
Ukrainian insurers call for help in disabling Russian business (Insurance ERM)
Leaders of the Ukrainian insurance sector have urged European and global peers through an open letter to assist in the defence of their country, by ceasing underwriting and investment in Russia. The measures (outlined in the article) they propose to their global peers have been met with varied reactions. Insurance Europe has announced it is “currently collecting feedback [on the letter] from our members” and Allianz has not yet decided to cease its insurance operations in Russia. More promisingly, Zurich has stopped underwriting new business in Russia and Aviva will be divesting the £240m in Russian bonds held by Aviva Investors’ funds as soon as possible. Several insurers have also announced substantial aid packages: Allianz has pledged €12.5m alongside Dutch and German insurers pledging over €3.5m.
Generali cutting ties with Russia (Financial Times)
Generali, Europe’s third-largest insurer, is winding down its Europ Assistance operations in Russia, quitting the board of Ingosstrakh Insurance Co. and closing its Moscow representative office, joining a growing list of multinational companies leaving the Russian market in protest of the invasion of Ukraine. The Italian insurer also owns a 38.5% stake in Ingosstrakh, a Russian-based insurer that has billionaire Oleg Deripaska as a shareholder and is also considering freezing its stake in the joint venture.
About the author
Thomas Spiller, Senior Manager
Tom is a Senior Manager at Oxbow Partners and has a range of experience across strategy, growth, digital and operating model projects in Europe, the UK and the London Market. Prior to Oxbow Partners, Tom spent three years working in the Strategy team at Suncorp, Australia’s largest general insurer. Tom has dual bachelor’s degrees in Economics and History from the University of Queensland.
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