“a global insurance system where sustainability factors are effectively integrated into the regulation and supervision of insurance companies.”
What is sustainable insurance?
The global insurance sector will play a pivotal role in the transition to a low-carbon, resilient and sustainable global economy, both in terms of
the risks it covers and the investments it makes.
Sustainable insurance is a strategic approach where all activities in the insurance value chain are conducted in a responsible and forward-
looking manner by identifying, assessing, managing, and monitoring risks and opportunities associated with environmental, social and
The UNEP FI Principles for Sustainable Insurance (PSI) serve as a global framework for the insurance industry to tackle sustainability issues,
including climate change.
Programme of Work 2021-2023
In 2020, the SIF members agreed to build on progress through a new programme of work for 2021-2023.
This has been designed to reflect SIF’s unique position by focusing efforts on three thematic areas and producing
a smaller number of high-quality outputs. Beyond this, SIF will partner with specialist organisations to influence,
support and raise awareness of work in this area.
Three areas of work:
- Climate-related risk on the insurability of assets
As insurers become better able to price and manage climate risks, a desirable prudential outcome would be that insurers continue offering coverage against climate-related perils on a sound, risk-adjusted basis.
SIF could support this by highlighting the approaches taken both by insurers and regulators in different jurisdictions to mitigate risks while offering affordable insurance, such as:
- new products being offered, including parametric insurance, to address climate risk protection gaps;
- private-public partnerships to minimise the impact of weather events;
- promoting transparency and disclosures around climate related risks and insurability; and
- updating building codes.
As humans continue to contribute to environmental degradation, habitat destruction and biodiversity loss, the impacts of zoonotic disease outbreaks, supply chain disruption, and ultimately, insurance risks and financial instability, will increase.
In particular, with a worldwide focus on the impacts that pandemics may have in the wake of Covid-19, it is relevant for the SIF to explore how biodiversity loss can translate into financial risks for the insurance sector.
Climate change has implications for a wide range of the work performed by actuaries, due to its impacts on mortality, health, financial stability, asset valuation and insurance risks, among other risks. Actuaries are continuing to improve the understanding and quantification of climate impacts on insurance companies and their methods of conducting business. Climate risks are being considered within the entire actuarial function, including product design, pricing, underwriting, risk management, and the valuation of assets.
With many facets of actuarial functions to be considered, the SIF will have opportunities to assist the understanding and mainstreaming of climate risks into insurance practices.
How does SIF work?
The SIF is a network of 30 members led by a Chairperson. The SIF functions as a voluntary leadership group for insurance supervisory authorities, which share a common objective of addressing sustainability issues impacting consumers, firms and markets in their jurisdictions, and a strategic interest in collaborating with their peers to share knowledge and identify best practices. The SIF conducts in-person meetings twice per year, alongside meetings of the International Association of Insurance Supervisors (IAIS). Under the current COVID-19 situation, these bi-annual meetings have been replaced by virtual meetings. In addition, SIF members participate in collaborative projects managed by the Secretariat.
With the launch of the SIF Work Programme (2021-2023), under the new governance structure, work will be undertaken by Working Groups including Members and Partner Organizations, led by a Chair of the Working Group. These Working Groups would be led by a Chairperson, and supported by the SIF Secretariat. The Working Groups will also engage external experts and other stakeholders, such as academics who may be conducting relevant technical research.
2018 – current: Mr. Geoff Summerhayes, Commissioner and Executive Board Member of the Australian Prudential Regulation Authority.
2016 – 2018: Mr. Dave Jones, Commissioner, California Department of Insurance.
How does the SIF engage with
other international authorities?
As a founder, the SIF works closely with the International Association of Insurance Supervisors (IAIS) on issues relating to sustainability, including climate change risks. This includes the development of collaborative outputs with the IAIS Secretariat, and engaging with the IAIS Executive Committee on sustainability issues relevant to the activities and strategy of the IAIS.
SIF also works in partnership with other supervisory coalitions focused on sustainability-related issues, including the Network of Central Bank and Supervisors for Greening the Financial System (NGFS) and the Financial Stability Institute (FSI) of the Bank for International Settlement (BIS), to provide input on activities relating to insurance supervision and regulation.
More broadly, the SIF works with Partners who are also focused on issues relating to sustainability within the insurance sector. This includes international and intergovernmental groups such as the UNEP FI Principles for Sustainable Insurance (UN PSI), UNDP Finance Sector Hub (UNDP FSH) and Access to Insurance Initiative (A2ii).
On 21 February 2020, SIF hosted the Eighth meeting of the Sustainable Insurance Forum (SIF8) in Basel, Switzerland alongside a meeting of the Financial Stability Institute (FSI) of the Bank of International Settlements (BIS). Due to Covid-19, SIF then hosted two online virtual meetings in May 2020, instead of the planned in-person SIF9 meeting.
SIF launched the public version of the ‘Question Bank on Climate Change Risks to the Insurance Sector’. The broader community, including other relevant industries such as the banking sector, now have access to the types of questions that supervisors may ask entities regarding climate change financial risks.
SIF and the International Association of Insurance Supervisors (IAIS) collaborated on the ‘Issues Paper on the Implementation of the Recommendations of the Task Force on Climate-related Financial Disclosures’. As part of the development of this paper a consultation webinar was held in collaboration with UNEP FI Principles for Sustainable Insurance in January 2020. The paper will be a valuable resource for supervisors taking action to enhance disclosures on climate-related financial risks. Since its launch on the IAIS website, the paper has been downloaded over 2,500 times.
As a follow-up, the SIF and IAIS have launched the draft ‘Application Paper on the Supervision of Climate-related Risks in the Insurance Sector’ for public consultation until 12 January 2021. This paper focuses on topics such as enterprise risk management, corporate governance, and investment and disclosure, in line with the Insurance Core Principles. To gather inputs for the paper the IAIS and SIF jointly hosted a webinar on 9 June 2020, which was attended by 300+ members and stakeholders. A public stakeholder event was held on 26 October by the SIF/IAIS which can be viewed here.
Also, in September 2020, SIF joined the Informal Working Group (IWG) of the Task Force on Nature-related Financial Disclosures (TNFD).