Insurers challenged on ESG commitments: WICA2023

Is your insurance organisation doing enough to meet its environmental, social and governance (ESG) obligations or to capitalise on the opportunities they present?

That’s a question a speaker at the World Insurance Congress Australia (WICA 2023) will challenge delegates to consider.

The Australian Insurance Law Association (AILA) will host the international insurance law association AIDA’s flagship event on 30 August to 1 September 2023 at the Melbourne Convention and Exhibition Centre.

Alan Dayeh , Sydney-based Partner, Sustainable Strategy and Financial Services, at ERM Group company Point Advisory, says insurance organisations must be aware of broader ESG factors around their business models and ensure they are “walking the talk”.

“Every insurer has its own business model and must look at risks and opportunities in light of its commercial strategies.” Mr Dayeh says insurers must consider the risks they’re underwriting and what they mean strategically and reputationally.

“For example, if other insurers are stepping away from a sector, do they want to be the last one standing?

“These are challenging internal questions that should inform every insurer’s practical responses and strategic approaches to a range of ESG-related topics.”

Mr Dayeh says the insurance sector has some good examples of organisations that are “leaning into ESG by embracing the original purpose of insurance – managing risks across society and contributing to broader economic and resilience outcomes”. However, he says underinsurance is a potential reputational risk for general insurers because some stakeholders expect them to provide an essential service that should be accessible to all.

With current high inflation, many people may choose not to insure assets like homes and vehicles. “What’s the ripple effect of that, how will regulators respond, will other players come in to fill the void?”

Mr Dayeh says the ability to obtain more granular data can make insurers more competitive.

For example, digital tools can enable insurers to get property data at a more individualised level than postcodes. “How insurers can better capitalise on their data is part of their commercial strategy.”

He says insurers must also consider ESG factors in their investment strategies.

The latest biennial 2020 Global Sustainable Investment Review (GSIR), to which Point Advisory contributed, shows global sustainable investment reached $US35.3 trillion in five major markets in early 2020, a 15% increase over the two-year reporting period.

“Insurers must be cognisant of their sustainable investment approach in this ever-growing market. Activist shareholders will keep them to account. “There’s already a big focus from shareholder activists in the financial services sector, particularly about climate change and, increasingly, human rights.”

Mr Dayeh is disappointed that “in some parts of the world ESG has been politicised by those who seem to lack an understanding of what it is and how it encourages organisations to examine ESG factors that affect their commercial success and stakeholder relationships”.

In his WICA 2023 presentation on the future of ESG, Mr Dayeh will encourage all insurance organisations to examine themselves “in deep and meaningful ways” to respond to a key question: “Is your organisation doing enough?”

World Insurance Congress chair Angus Kench says WICA 2023 is a unique opportunity to draw international visitors from AIDA’s global chapters to Australia.

The event starts with presentations from each of AIDA’s 13 working parties that closely examine specific insurance issues from global and regional perspectives.

Panellists and expert speakers will then present on four key themes – climate, conflict, ESG, and innovation and careers. The speaker program is continually updated as more industry leaders commit to presenting at WICA 2023.

Australia has hosted the prestigious World Insurance Congress – held every four years – only once before, in Sydney in 1994.