80 per cent of in­vest­ments linked to sus­tain­abil­i­ty cri­te­ria

The Sustainability Report 2021, published by the Swiss Insurance Association (SIA), reports on developments in the ecological, financial and social sustainability activities of insurers operating in Switzerland. The industry contributes 4.2 per cent to gross domestic product and is a major investor, with cumulative investment capital of CHF 545 billion. The fact that 80 per cent of self-managed investments take ESG (environmental, social, governance) criteria into account in the investment process reflects the industry’s commitment to sustainability. A majority of companies have internal guidelines in place with provisions on sustainable investment, the exclusion of certain investments and the exercise of voting rights. Exclusion policies were the most frequently used approach, with a further eight companies implementing them in 2021. This means, for example, that 30 private insurers exclude investment in companies that generate revenue from thermal coal mining or which use a certain proportion of coal for power generation. ‘Smaller insurance companies are also reviewing their strategic positioning and focus in terms of sustainable investing,’ says SIA CEO Urs Arbter.

‘As much regulation as necessary; as little as possible.’ At the SIA, we believe that this basic principle is also important when it comes to sustainability. Environmental and climate risks are not new risks per se, but rather additional risk drivers that affect existing risk categories. Transparency regulations are becoming ever-more important in the field of sustainability as well, since international rules and standards, such as the Task Force on Climate-Related Financial Disclosures (TCFD), are increasingly transferred in full into national law. The industry association of private insurers is committed to transparency – which is also reflected in the Sustainability Report 2021. ‘However, the transparency efforts of the entire financial sector hinge on similar action in the real economy, as these efforts are based on that,’ stresses Arbter.

Apart from investment, the insurance industry has further levers at its disposal to help shape sustainable development. By engaging in its core business, the assumption of risk, the insurance industry contributes to a more resilient economy. Thanks to the financial protection offered by insurers, companies need less risk capital and thus have more resources for business development and innovation financing. In the operational implementation of risk management (underwriting), the insurance industry is faced with the question of how to deal with sustainability criteria. What risks are assumed? Which should be completely excluded because they are uninsurable or because insurers are unwilling to take on the risk on ethical grounds or due to reputational risk? Private insurers have their own answers to these questions set out in their risk management guidelines. One thing is clear: ‘The additional focus on sustainability makes underwriting an even more complex matter,’ says Arbter.

The insurance industry has a natural interest in environmental sustainability, as climate-related risks and extreme weather conditions have a direct impact on the core non-life insurance business. The insurance industry has an interest in keeping premiums as low as possible in order to be able to offer its customers attractive products. After all, insurance companies also make a key contribution to achieving the Paris climate targets. But the term ‘ESG’ does not cover all essential aspects. ‘Environmental sustainability can be achieved only if there is financial and social sustainability,’ comments Arbter.

Adapt the three pillar system to suit demographic changes

When it comes to old-age provision – an area in which private life insurers have always been heavily involved in occupational pension provision – the SIA is guided by the principle that no generation can afford to live beyond its means, as this inevitably leads to losses for future generations. ‘This is expressed succinctly in the concept of intergenerational equity,’ explains Arbter. As a result, the SIA is committed – irrespective of the ongoing reform efforts in the first and second pillars – to an old-age provision that is fair to all generations and based on the proven three-pillar system. ‘The law pays almost no heed to intergenerational equity in occupational pension provision. The excessively high Occupational Pensions Act (OPA) conversion rate leads to huge pension conversion losses for pension funds and thus to a redistribution from active insured persons to pension recipients, which is not envisaged in the system,’ states the Sustainability Report 2021. The report also gives an account of how insurance companies use initiatives such as InsurSkills and the startsmart.ch platform to strengthen the labour market skills of their employees, promote lifelong learning and help shape the working world of tomorrow. The industry’s recommendations on employment conditions in the insurance industry now include an explicit commitment to promoting employability.

Energy-saving corporate environmental management is also part of the industry-wide sustainability endeavours. The industry’s carbon footprint per FTE employee fell slightly by 2 per cent year on year. Building energy consumption fell by 14 per cent and business travel emissions by 24 per cent, despite the easing measures in connection with the COVID-19 pandemic, thanks to further progress made in digitalisation.

The SIA has reported on the sector’s sustainability performance annually since 2020. The Sustainability Report 2021 is based on consolidated data collected at company level and covers a large proportion of insurance companies operating in Switzerland. It was produced in line with the Global Reporting Initiative (GRI) standards. For this third issue, interviews were conducted with industry experts as a new feature. Results from a structured dialogue process with stakeholders from politics, academia, non-governmental organisations, member companies and other interest groups were also included for the first time.

The Swiss Insurance Association (SIA) represents the interests of the private insurance industry at the national and international level. The association comprises about 70 primary insurers and reinsurers employing a workforce of 49,902 people in Switzerland. Overall, the member companies of the SIA account for about 85 per cent of insurance premiums generated in the Swiss market. This makes the insurance industry and, as a result, the SIA a major force in the Swiss economy. Private insurers are therefore committed to the successful and sustainable development of the areas in which they operate, in business, social and political terms, and thus assume economic responsibility.

Swiss Insurance Association SIA
Sibylle Zumstein, media spokesperson
Phone: +41 44 208 28 95
Email: sibylle [dot] zumsteinsvv [dot] ch (sibylle[dot]zumstein[at]svv[dot]ch)
Head office phone: +41 44 208 28 28