Opening perspective to Sustainability Leadership in Insurance

Failing to take care of the planet means not taking care of our own resilience.

In a series of virtual events, the UNEP and Swiss Re team up to discuss and progress PSI, UNEP's Principles for Sustainable Insurance Initiative. The first event brought together UNEP's Executive Director Inger Andersen with Swiss Re's Group CEO Christian Mumenthaler. Moderated by Eric Usher (Head of UNEP Finance Initiative), the in-depth discussions also featured Alison Martin (CEO EMEA and Bank Distribution at Zurich Insurance Group), Dr. Maria Neira (Director Department of Environment, Climate Change and Health at WHO) and Mike Mitchell (Head P&S Underwriting Reinsurance at Swiss Re).

If we liken the COVID-19 crisis to fighting a war, then we're confronting an invisible enemy that multiplies exponentially on the battlefield. In the face of such turmoil, as the UN Secretary-General has indicated, COVID-19 will require a response like never before – a war-time plan in a period of human crisis.

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Nature has sent us an invoice with this crisis

The immediate priority is to protect people from the coronavirus and prevent its spread, but our long-term response must tackle habitat and biodiversity loss. Human activity has already altered almost 75% of the planet and yet nature is critical to our own survival. We need to take on board the environmental signals and what they mean for our future and wellbeing – nature has sent us an invoice with this crisis.

The global health emergency requires a sound environmental response. UNEP’s Frontiers Report in 2016 reports 60% of all known infectious diseases in humans and 75% of all emerging infectious diseases are zoonotic. Never before have so many opportunities existed for pathogens to pass from wild and domestic animals to people, causing zoonotic diseases or zoonoses.

Failing to take care of the planet means not taking care of our own resilience.

We need to invest in better understanding of the science of disturbance and risks, towards a global mapping of, for example; encroachment, illegal trade and wet markets that are pathways for potential future zoonoses.

Failing to take care of the planet means not taking care of our own resilience. At the end of the day, the better we manage the health of our ecosystems, the better we manage human health. The insurance industry needs to be part of this effort.

There is now an opportunity to build back better

Post-COVID, the remainder of this year is going to be critical in making progress on the climate emergency and halting biodiversity loss. There is now an opportunity to build back better. Locking down 1.5billion people has had visible, positive environmental outcomes but is clearly causing tremendous human suffering and economic distress. It is not a long-term solution. What we need is a solution that enables us to live sustainably and healthily without poverty and avoid our current path of destruction. The recovery plan must implement an ambitious, measurable and inclusive framework that keeps nature rich, diverse and flourishing because nature is part and parcel of our life's support system. To achieve real progress on the UN Sustainable Development Goals (SDGs), global solidarity and multilateralism is critical and we must advance climate action using the next COP to help us make that push.

It is too early to assess the impact of COVID-19 on the insurance industry, but four, perhaps less well-known, aspects to the pandemic are worthy of mention:

  • Behavioural economics - This pandemic is no black swan. Back in 2007 the CRO Forum published a paper that discussed the implications of a Spanish Flu-like pandemic spreading in the 21st century. The paper suggested that it would originate in Asia and there would be a huge loss of life and similarly massive loss on the liability and asset side of company balance sheets. What was unforeseen in the analysis, was the reaction of society, in the form of a worldwide lockdown. Even if foreseen, human nature is such, that we underestimate risks that do not happen in our lifetime.
     
  • A crisis of values - The focus now is on the health risk, where the hot war is hopefully over and now the cold war against the virus begins. Next, will be the economic crisis followed by a possible spillover into a social crisis and potentially a crisis of values. The more protracted the health and economic crisis becomes, then the greater the impact will be on how we think and behave.
     
  • The concept of resilience - This is very closely linked to insurance and sustainability. Over the past months, societies have reacted in different ways to the pandemic. Some have proven to be more resilient than others, dependent upon the strength of their health and social systems.  In emerging countries and some developed countries, elements of resilience are missing; healthcare coverage is patchy, there are insufficient savings, insurance penetration is low and social systems are not so developed. Hopefully, one positive outcome from the pandemic is that the concept of sustainable resilience will become more prevalent for society.
     
  • The philosophical debate - There is a good chance that the pandemic will transform us, but it is still unclear how. There are two scenarios – the first reaction foresees strong protectionism, value chains moving inside individual countries, and generally-speaking, the spread of a fear-based philosophy. The second scenario is positive. Here, we choose a route of solidarity and increased cooperation where firms collaborate, and humanity stands as one to repel the virus.

Should this second scenario triumph, and thankfully this appears to be the case, then the fight against climate change goes firmly back on the agenda. Science has been pushed back over the last few years by the belief of the world in social media. Now, the world is increasingly listening to the scientific view on climate change, as it has on pandemics. The failure of the populists in this crisis can only accelerate the comeback of the scientific viewpoint. The scientists already tell us that another coronavirus is around the corner and we need to ensure that we will be better prepared for it. This increases the importance of mitigating the risk through Public-Private Partnerships (PPPs) and the SDGs represent a framework to support us getting there.

Insurers can be part of the solution in influencing policy makers, motivating governments and society to become more resilient to withstand future risks. Insurers can also partner with the WHO to encourage implementation of guidelines on for example; air pollution and subsidies for fossil fuels. Provided the right narrative is used, this multi-lateral approach is a viable answer to dealing systematically with pandemics, climate change and a lot more besides.

Insurers can help accelerate the shift towards more sustainable and resilient economies

There is no doubt that the insurance industry can play a monumental role; as risk managers, insurers and investors, to accelerate the shift towards more sustainable economies and communities. Insurers are already prioritising the levers which can make the most impact. On the asset side, they are increasingly ESG benchmarking their investments. Initially, there was concern that this could reduce profitability, that going green was philanthropy, but the opposite has proven to be the case. Green investment is bringing superior returns and giving insurers positive externalities. In addition, there is a tendency for insurers to move towards net-zero in their operations. Air travel for professional meetings and conferences, for example, was already being cut prior to the crisis. Post-crisis, this tendency will likely increase, due to the feasibility of digital meetings.

By insuring SDG-supporting business ventures, the insurance industry can be a positive force for change on the liability side. Insurers increasingly underwrite client solutions that support sustainability using the measure of the SDGs.

Just as nature plays a foundational role in businesses, the insurance industry can demonstrate strong leadership to overcome this global health crisis, to build resilience against both pandemics and climate change, as well as to ensure the long-term sustainability of the financial system. After all, the vision of the PSI Initiative is of a risk aware world, where the insurance industry is trusted and plays its full role in enabling a healthy, safe, resilient and sustainable society. What seems clear is that there can be no going back to how we were before the crisis.

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pandemics buildingsocietalresilience corona covid19

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