Finance: Insurance and Reinsurance

Published on 09/15/2020

This is a methodological document aimed at clarifying how Mirova takes into account sustainable development issues in the framework of the environmental, social and governance analysis of each sub-sector of activity.

Mirova

While environmental, social and governance issues have been taken into consideration by insurance and reinsurance companies for a few decades, the urgency of the environmental and sanitary crisis is pushing them into the spotlight. Reinsurers especially have been pioneers in the understanding of emerging ESG risks and their modelling. Indeed, such knowledge is at the cornerstone of the relevance of their insurance covers. However, in recent history, climate change and sanitary issues have gathered increasing scrutiny. Bearing the risks, the aim and responsibility of the insurance industry helps ensure the long-term resilience of our societies.  

Insurers – and by extension reinsurers – have an essential role to play in a sustainable economy. Indeed, within an insurance company, numerous activities coexist and often encompass the financial value chain at large: reinsurance, insurance and investment. In other words, their activities consist both in offering insurance covers to various actors (individuals or businesses) and in investing in the economy through the allocation and management of the financial assets that they own, usually following long-term strategies. In addition, large insurance companies also carry out asset management activities for third parties. Regarding the insurance cover, several type of products might be offered. Indeed, while Property and Casualty (P&C) insurance refers to the cover of material assets/goods, life and health insurance are specialized in the support of individuals or groups of individuals. 

Thus, insurers can directly contribute to sustainable development issues through two canals: insurance products and investment policies. Insurers can also address country development issues by offering products tailored for traditionally under-served groups also known as “emerging customers” or the “Bottom of the Pyramid”. 

To some extent, the sustainability risks for this sector are similar to the banking sector's. Nevertheless, some specificities directly derive from premium-related activities. Although insurers and reinsurers were traditionally less subject to scrutiny than banks regarding their sustainability performance, the risks undertaken – inherent to their business models – can have a systemic impact on the economy. 

In addition to promoting exemplary business ethics, companies are expected to adopt responsible customers management policies and to protect personal data. Privacy and integrity issues are all the more critical since insurance products are becoming more complex and relying on connected devices. Moreover, in an industry disrupted by new technologies, (re)insurance companies should make sure their employees’ capabilities and skills are aligned with the sector’s needs and evolutions and should monitor their ability to attract talents.   
 

This is a methodological document aimed at clarifying how Mirova takes into account sustainable development issues in the framework of the environmental, social and governance analysis of each sub-sector of activity

Laurene CHENEVAT
Laurène CHENEVAT
SRI Analyst & Advocacy Officer

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