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Fronting the sustainability agenda

Source: Asia Insurance Review | Aug 2019

Asia Insurance Review spoke to Willis Towers Watson’s Rowan Douglas about the industry’s efforts to reduce the protection gap and foster greater resilience among communities that are vulnerable to disaster and the ensuing economic shocks. 
By Ridwan Abbas
The Insurance Development Fund (IDF) was launched in 2016 to optimise the use of insurance in building greater resilience for communities and businesses vulnerable to natural disasters. 
The importance of insurance in helping economies recover faster from disasters and rebuild with greater resilience for the future is now being understood more and more. 
But there was a time, not so long go, where insurance was not necessarily part of the conversation when discussing sustainability and resilience. While leading global reinsurers were among the first to raise the flag of concern around climate change back in the 1970s, the value of insurance in promoting environmental, economic and social security has not always been well appreciated. 
“It is remarkable when you sit around in one of the IDF committees and for the first time you have insurers, governments, donors and regulators all sitting at the same table as equals sharing a common agenda,” said IDF co-founder Rowan Douglas. 
“The difference now from, say five years ago, is that the question is no longer if insurance will play a role in sustainable development, but how insurance will play a role in sustainable development,” he said. 
Getting more people insured
Through the IDF, the industry is partnering with intergovernmental agencies like the United Nations to extend insurance coverage to more people – especially those vulnerable to climate risks. At the upcoming UN Climate Action Summit in September, a target to cover as many as 500m newly insured people against climate risk is expected to be set, said Mr Douglas.
“The industry’s aim is to support that through a variety of means like macro sovereign type protections to protect governments which then protect their populations, often through parametric insurance. That is going to be a big push.
“There is also going to be a focus on micro insurance … there is the relationship between insurance and credit as people seek access to funds to support their development as families or small companies. And it’s how insurance is wrapped into that industry which is also critical to the growth of our sector,” he said. 
Mr Douglas, who is also head of capital science and policy at Willis Towers Watson, believes that having better dialogue with policymakers and regulator is a critical component in the effort to reduce the protection gap – both in Asia and elsewhere. 
“Most of the insurance that is purchased today, whether in mature or developing markets, is bought because of regulation that says you have to. And until governments recognise the role that insurance has in helping society manage and share risk, it will always be challenging for customers to buy insurance as a completely elective service.”
Competing forces
While talk of intangible assets in a changing risk landscape is inevitable, he said that there was still a lot to do in terms of insuring physical assets as well as people who are still not adequately protected. Nonetheless, the fact that data has become a very valuable asset today means the insurance industry will also simultaneously have to rise to the challenge of guarding digital and intellectual property assets. 
Despite protectionist forces seemingly becoming a real threat to global growth, protectionism within the insurance sector is still limited to small pockets of the market. But it is a phenomenon which could grow, and the industry needs to be proactive in reversing such trends. 
“We have to help countries understand that they are not so much exporting capital, rather they are exporting risk. And when serious Nat CAT events occur, having money from overseas coming to protect countries when they are stretched as a result of catastrophes is hugely significant,” said Mr Douglas. 
Do insurers walk the talk? 
One of the criticisms levelled at the industry is that despite all the talk of sustainability, insurers are behind the curve compared to other sectors in terms of sustainable investing, as well as the slow pace of change when it comes to underwriting coal-based risks. 
While acknowledging the sector could do more, Mr Douglas does not feel that insurance is necessarily lagging behind other industries in this regard. He pointed to initiatives such as the ClimateWise Insurance Advisory Council which guides the industry’s efforts in the transition towards a low-carbon economy, the pioneering framework set out under the UN principles of sustainable insurance, as well as growing efforts around sustainable underwriting/investments and diversity and inclusion. A 
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