Com­mit­ted to sus­tain­abil­i­ty

(GRI 102-16)

Insurance companies have a long-term horizon for action. Meeting the needs of the present without compromising the options open to future generations – this is the definition of sustainability and also one of the core concerns of the insurance industry. This applies to the stabilisation and enhancement of pension provision, the design of the rapidly changing working world, climate change and the conservation of biodiversity. All these issues are important if we want to ensure that the younger generation can enjoy a secure pension, that employees have attractive jobs open to them in the future and that the economy has access to well-trained specialists – so ultimately our livelihoods are protected and our ecosystem becomes more resilient in the face of damaging influences. Despite the domination of the COVID-19 pandemic last year, the SIA worked hard to ensure a sustainable future, focusing on its three strategic priorities. 

Thanks to its three-pillar system, the Swiss pension system has been considered the gold standard in international comparison for decades. For some years now, however, our country has been falling further behind in the relevant rankings. This is due in particular to the unsustainability of the system. Various proposals and initiatives to reform the old age and survivors’ insurance (OASI) system and occupational pensions sparked considerable political activity last year. The SIA also contributed constructive proposals for solutions to the ongoing political debate on reform of the pension system. 

Sustainability was also an important issue for national and international regulators alike; for example, the Swiss parliament adopted the revised version of the CO₂ Act. This legislation will come into force if the electorate approves the revision on 13 June 2021. The Swiss Financial Market Supervisory Authority (Finma) is increasingly concerned with the integration and transparency of climate-related risks in insurers’ accounts. For example, the introduction of the Sustainable Finance Disclosure Regulation (SFDR) and the EU taxonomy in the EU will keep insurers in Switzerland busy over the next few years. 

Swiss private insurers are important employers, taxpayers and investors at a national and international level. They take on risks that business and retail customers are not willing, or indeed able, to bear, allowing these customers to adopt a forward-looking approach to how they use their resources for the good of the economy and society alike. In Switzerland, the overall insurance industry generates gross added value of about CHF 32 billion. At almost 5 per cent, it makes a significant contribution to the country’s economic output and ensures economic and social stability and resilience, even in these times. As a result of the pandemic, primary insurers made claims payments of more than CHF 1 billion last year. In addition, Swiss-based reinsurers reserved or paid out more than CHF 4 billion for pandemic-related claims worldwide in 2020. The industry also continued to meet its other obligations. It paid an average of about CHF 140 million in pensions and claims payments out every day. Insurers also took swift and targeted action with minimal red tape to help many of their SME clients. 

The pandemic has revealed the limits of insurability. As a result, the insurance industry worked in close collaboration with the federal government to develop possible solutions for future pandemic insurance based on the concept of public-private partnership. Regrettably, the Federal Council has decided not to pursue the concept of pandemic insurance for the time being. It intends to stay with the current model of hardship support and debt repayment by taxpayers in the future. From the insurance industry’s point of view, this is not a sustainable approach to the problem. 

As a supporting pillar and driving force of the Swiss economy, the insurance industry takes its economic responsibility in terms of sustainability into account, as evidenced by its clear commitment to sustainability and its gradual implementation in the insurance business. For example, the SIA’s member companies spoke out in favour of compliance with the Paris Agreement as early as 2016, and pledged to lend their support to the Federal Council’s associated CO₂ reduction targets. With capital investment of CHF 545 billion (excluding unit-linked life insurance), private insurers can potentially make an important contribution to promoting a more sustainable environment – be it to the climate or in social endeavours. 

All these developments serve as confirmation that the SIA will continue to work intensively on the issue of sustainability.

The situation analysis (GRI 102-46), which serves as the basis for the association strategy for 2020-2024, shows that a large number of external factors challenge the insurance industry. Rapid advances in digitalisation influence customer needs and open up new opportunities for product design and pricing. Ongoing demographic change within society presents major challenges for the healthcare and pension systems. Climate change leads to increased physical risks in natural perils insurance, and also to transition risks in investment portfolios in connection with the move to a low-carbon economy. New communication channels are changing the way insurance companies communicate with their clients. The understanding of the roles between the private sector and the state has to be renegotiated time and again, which recently became very clear in connection with the pandemic. Changes in international legislation also have an impact on legislation in Switzerland. The ongoing phase of extremely low interest rates poses a major challenge to investment policy as a whole. Technological change is also having an impact on the working world of tomorrow. New skills will be required in the future. 

Based on the situation analysis referred to above, six strategic directions were defined as part of the strategy. Three of these objectives place a clear focus on the topic of sustainability in a holistic sense: 

• Further development of pension provision 
• Anchoring sustainability, enabling innovation 
• Shaping employment policy and the working world 

These three aspects establish important factors in the development of the insurance industry – as we move towards a secure pension system and a new working world, and in the fight against climate change and the preservation of biodiversity (GRI 103-1). 

An effective pension system plays a central role in determining a country’s prosperity. Changes in Switzerland’s age structure are pushing the existing pension system to its limits, and it must therefore be fundamentally revised. The insurance companies are an essential partner in this process, as they are responsible for a significant part of the pension system, namely for occupational pensions and in some cases also for the third pillar. The pension system has to be revised in such a way that the younger generation can look forward to a fair pension. Redistribution in the second pillar from the young generation to today’s retirees has to be kept to a minimum. 

The rapid advances in digitalisation (GRI 103-1) will lead to different skills and competencies in the future. This also applies to apprentices and trainees in the insurance industry. In order to remain attractive as an employer and to meet the challenges of the future, the sector has to make intensive preparations for these developments. 

Insurance companies consider the effects of climate change and the loss of biodiversity (GRI 103-1) to be a risk with the potential to inflict real damage on society and the economy. Rising temperatures are expected to result in more heavy precipitation and an increase in drought in Switzerland. Biodiverse ecosystems are important in combating climate change, as healthy forests and well-preserved oceans can absorb carbon emissions. However, a high level of biodiversity ensures that nature produces substances essential for human activities and survival, ranging from food and protective functions to active ingredients used in medication. 

This is why the insurance industry supports the federal government’s goal of achieving net-zero greenhouse gas emissions by 2050 (GRI 102-11). The strategy calls for standards to be developed for products, underwriting, claims and investments, in order to forge ahead with reductions in greenhouse gases. In order to mitigate the implications of global warming, the SIA will continue to support the federal government and cantons in preventing damage caused by natural perils. 

The SIA has also made a commitment in its strategy to publication of regular and transparent reports on implementation of its sustainability efforts (GRI 102-19, GRI 102-20). The SIA’s Sustainability Report, which was published for the first time in 2020, will be published every year (GRI 102-52) in the future. In order to make faster progress in topics relating to sustainability, the SIA also established the Sustainability Committee last year. It is responsible for advancing specific sustainability issues and creating the necessary transparency at the level of the association.

The Swiss insurance industry considers its Sustainability Report to be an important tool in an ongoing and systematic dialogue with its stakeholders (GRI 102-42). By increasing transparency, it aims to ensure that its internal and external stakeholders can understand and assess its activities relating to sustainability. This process has involved identification of those organisations, individuals or groups that are in contact with the industry, exert influence over the insurance industry and/or have touchpoints with its activities. The main stakeholders include the association’s member companies, clients, non-governmental organisations, academic experts, Finma, authorities, policymakers, the media, associations, institutional investors and other capital providers (GRI 102-40). Stakeholder interviews were conducted with representatives of these stakeholders during the first half of 2021 (GRI 102-40). These personal discussions were based on the sustainability topics set out in the SIA’s strategy 2020-2024. The findings of the interviews will be used to define the focal point of future activities to make the industry more sustainable. 

Stakeholder engagement and the results of addressing their interests and information needs will be presented in the next Sustainability Report (GRI 102-44).