Integrating Sustainability in Insurance

~ Posted on Saturday, January 14, 2023 at 8:41 AM ~

Insurers are taking different approaches to adopt Environmental, Social, and Governance (ESG) measures into their strategies.

What are the steps that the industry has taken in adopting these measures and how do reinsurance leaders play a role?

Bringing Consumers Along on The Transition Path
In industries such as the burning of thermal coal, insurers typically distinguish between "writing new business," which can happen sooner, and "ceasing to renew existing business," which may take a little longer. Both regulators and insurers concur that in the case of these businesses, insurers must make sure that they in some way take their consumers along and develop a transition path with them. This plan may also entail giving clients advice on how to raise their ESG profile.

Developing New Standards
By developing standards for screening and assessing risks according to an ESG rating, insurers and reinsurers have improved their own underwriting portfolio. Subsequently, there is also an aim to reduce risks with a negative ESG profile and to strengthen those with a more favourable profile, such as risks associated with renewable energy.

Phasing Out Assets with Poor ESG
In terms of assets, insurers and reinsurers follow a similar strategy – first, analysing their own portfolio based on a set of ESG criteria and then gradually phase out assets with a poor ESG profile while increasing investments in assets with a better profile.

Impact On the Regional Markets
As announced by international insurers and reinsurers, changing carbon footprint and setting goals for carbon neutrality have an impact on the ASEAN insurance markets as well. While subsidiaries of international insurers must adhere to the group’s standards on carbon emissions, national and regional insurers have also managed their footprint by setting targets and defining roadmaps to achieve these goals.

As the world evolves, technology has found its significant role in many industries, insurance being one of them. The difficulties society faces in the areas of the environment, society, and government are becoming more complicated. The insurance business must participate in tackling these difficulties as a manager of risk and cannot simply stand by.

Reinsurers such as Malaysian Re play a key role in shaping the industry as they help to stabilize insurers should there be any loss experience by distributing specific risks. Additionally, MNRB, as the parent company of Malaysian Re, boasts an extensive business portfolio across Asia and the Middle East. The institution plays a key role in managing sustainability risks and managing ESG issues, as they help distribute particular risks among insurers by helping them stabilise in the event of a loss. Visit the MNRB website to learn more about other MNRB businesses related reinsurance, retakaful, retail takaful and more.

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