- The principles for sustainable insurance - global consultations version. (0.51 MB)
The United Nations Environmental Programme (Unep) Finance Initiative (FI) began global consultation sessions on its draft Principles for Sustainable Insurance (PSI) in Johannesburg on Wednesday, after which another six workshops would take place in different regions across the world.
The event was considered significant for the insurance industry nationally, regionally and globally, as it grappled with rapid changes in climate, in regulatory environments, in governance, and in socio-economics.
The meeting in Johannesburg was hosted by Santam and the South African Insurance Association (SAIA), with the aim of consulting on the draft PSI ahead of the United Nations Rio+20 conference on sustainable development scheduled for June 2012, which was where the final PSI would be launched.
Thus South Africa’s insurance industry was playing its part in the creation of a global best practice framework that would facilitate systemic consideration of environmental, social and governance risks and opportunities in core insurance companies.
Important roleplayers in the South African insurance industry were present at the workshop, and were encouraged to give honest feedback and suggestions for the PSI.
Unep noted that the action from companies after the release of the PSI was more vital than merely signing on, and it was important, therefore, that signatories to the principles were involved to ensure that these guidelines were realistic.
Santam CEO Ian Kirk noted that the initiative was about getting better risk management on the ground, and developing the sense that the industry was able to shape policy to make a more sustainable industry.
The industry would need to collaborate and consider the new landscape of risks, and be proactive in dealing with these, as it was an industry, which was viewed as having important risk identification and management capabilities, which could potentially change the way people think about the environment.
Unep FI PSI initiative programme leader Butch Bacani emphasised that it was important to take a systemic view and recognise the economic value of natural capital, and how it underpinned everything that people do and affects social capital and governance.
Unep FI unit head Paul Clements-Hunt emphasised the need for stable and resilient capital markets and financial systems, and said that integrity and credibility in these were built when the principles translated into action. “Driving change in complex institutions is tough, but it is what is required,” he added.
Bacani made note of the solid research foundation of the initiative, which started in 2008/9. It was important to provide concrete examples, and case studies, and in South Africa, the industry’s Business Against Crime initiative was highlighted for the role it played in decreasing vehicle crime, as well as the industry’s way of dealing with HIV/Aids insurance issues.
These examples were identified, and the initiative sought to make these the standard, rather that the exception in the industry.
Specifically informing the PSI, was a case-study of the Eden community in the Western Cape, conducted by the Council for Scientific and Industrial Research (CSIR) and commissioned by Santam.
The study, led by CSIR Ecosystems competence area manager Dr. Deon Nel started in September 2010 and sought to understand how risk was changing for Santam, and what was driving systemic insurance risks.
The study focused on fire, flood and sea storm risk, as these were happening more frequently. While much of the emphasis was on climate change, Nel argued that changes to the ecological buffering capacity of the landscape - such as changes in land use, or the spread of alien vegetation - were a greater and more immediate driver of growing risk.
“Insurance is a great connector across communities, landscapes and ecosystems. It has the potential to either divide communities into ever decreasing and disconnected segments, or it has the power to unify and mobilise communities to work together towards addressing their shared risk,” said Nel, highlighting the potential contained within the PSI initiative.
Unep's PSI is an initiative akin to the Principles for Responsible Investment (PRI) for the global investment community, and the Equator Principles, led by the International Finance Corporation that set standards for determining, assessing and managing social and environmental risk in project financing.
The PRI was launched in 2006 and there are now over 860 signatory entities, representing 45 countries with some $25-trillion in assets under their management.