Insurers have different priorities when it comes to sustainability, and a standardised framework cannot make decisions on behalf of the board of management, one expert has said. 

Frank Schiller, a board member of the Actuarial Association of Europe and former chair of AAE Sustainability and Climate-related Risks Working Group, noted that lacking a consistent reporting framework, larger insurers may wish to develop their own frameworks for assessing the sustainability impacts of their products. 

“They might have different views on certain topics, especially for consumers,” he said during a webinar organised by the AAE on Tuesday. 

Some examples of features in insurers’ sustainability frameworks include value-added services that help the customer prevent the insured peril from occurring. 

Schiller said it is the board of management of each insurer to decide on the priorities within environmental, social and governance aspects of sustainability they want to take: “Is it the E? Is it the S, or is it the G?”

He added: “You cannot find a consistent framework which can be followed by every company.”

His comment came in response to a question by mallowstreet about whether insurers should return to the Net Zero Insurance Alliance for a standardised approach, given that the alliance has now dropped stringent requirements to disclose decarbonsation targets.

Schiller is also a chief actuary for life and health reinsurance in Europe and the Middle East at Munich Re, one of the first members to leave he alliance. 

He said: “Being part of this Net Zero Insurance Alliance would have meant that we might come into issues with antitrust. So that's what we saw in several markets, or at least in one very big market in the United States. In the end, it was a management decision to say, ‘Okay, what can we do now? Should [we focus on] risk governance issues or should we focus only on the environmental aspects?’”

Schiller concluded: “That's one of the problems we cannot solve by just providing a framework because frameworks cannot decide for the board of management in the end.”

After Munich Re’s departure, several re/insurers also left the alliance following pressures from US authorities claiming they could be violating antitrust laws. In July, the alliance made a drastic decision to say its members were no longer required to set or publish targets. The NZIA is now left with 11 members, down from 31.

Using building insurance as an example, Schiller outlined a number of features of what could make a product sustainable.

First, he argued such a product needed to be attractive and attainable for housing, “to avoid protection gaps so that people are still able to buy such products”. 

It should also include an element to determine, among others, extreme flood risks “to identify these risks, to measure these risks, and also to be able to think of measures against these risks”. 

Schiller stressed the importance of transparency and that sales advisers and underwriters should openly discuss with the policyholder what can be done to mitigate the risks identified.

Lastly, in highly exposed areas, claims payments could be linked to the requirement to rebuild the house in a less exposed area or with features that effectively reduce the risk of damage due to flooding, he said.