Insurance is per se a business model designed for sustainability. Protecting people and their property is a core task of the insurance industry. As risk carriers, insurers therefore make a concrete and direct contribution to global sustainable development on many different levels. The range of measures extends from protecting the individual against the consequences of sickness and accidents as well as the impacts of natural disasters on crops and property to supporting the global energy transition.
As an insurance undertaking, we too have a whole range of possibilities to actively support these developments. In our role as risk carrier, we enable the necessary technical advances and thereby facilitate the ongoing refinement of processes and products at companies, for example in connection with the reinsurance of renewable energy sources. As an investor, we provide capital for innovative businesses and technologies that actively contribute to the achievement of climate and sustainability targets. As a solution provider, we develop innovative insurance products that deliver protection – especially for people in emerging and developing countries – against the now avoidable economic and social consequences of climate change. And as a centre of competence for the management of risks, we are able to play an active part in the social and political discussions around how to fight the causes and impacts of climate change.
ESG in insurance business
With our core business, we support the global transformation of the economy and society towards a climate-friendly, resource-saving and social future. Key points of reference here are the ten principles of the UN Global Compact as well as the 17 Sustainable Development Goals of the United Nations.
A focus of our efforts is on providing insurance solutions for population groups that previously had too little insurance protection or could only obtain it with difficulty, on delivering insurance offerings that mitigate the impacts of natural disasters or climate change and on commitments to sustainable technologies. This also includes an intensive dialogue and knowledge transfer with primary insurance companies, partners and insurtechs or participation in initiatives or research projects that support fulfilment of these goals. This applies to both, our P&C and our L&H area.
Our cooperation with BIMA
The insurance density in emerging countries is typically less than 3% of gross domestic product. In particular, this is often due to the fact that insurance products are too complex and unaffordable for emerging markets and can also be explained by the lack of (financial and insurance) knowledge of end consumers in general. Challenging times such as the current Covid-19 pandemic hit people without ready access to healthcare especially hard.
In contrast to insurance density, however, the penetration of mobile telephony in emerging markets has surpassed the 80% mark. BIMA, a leading provider of insurance solutions using mobile technology, makes the most of this for the common good. BIMA uses mobile technology to deliver affordable and simply structured life and health insurance products with simple registration via SMS or a phone call – thereby reaching as many people as possible who were previously underinsured or not insured at all. BIMA not only offers access to mobile insurance and telemedicine services, it also educates customers. In emerging markets both are decisive factors for people for whom insurance in general and the purchase of an insurance policy is uncharted territory.
BIMA is supported by partners from the mobile telephony industry as well as Hannover Re with its (re)insurance expertise. The expansion of insurance protection to include previously inadequately insured population groups in the area of life and health (re) insurance forms part of our sustainability strategy and our partnership with BIMA supports this commitment. Together, we want to enable underserved families to access less complex and more affordable insurance and health services so as to protect them against life’s greatest financial and health-related risks.
Consideration of ESG criteria in insurance business
A second focus is on the consideration of ESG criteria in insurance business. A reduction in insurance availability, for example, results in the scaling back of controversial technologies such as coal-fired power generation. At the same time, the inclusion of ESG risks in underwriting practice is a key component in identifying and managing sustainability-based risks, which can affect the claims frequency and amount.
Back in 2019 Hannover Re had already set itself the goal of no longer covering any risks connected with the mining of and power generation from thermal coal in its entire property and casualty reinsurance portfolio by the year 2038. In 2020, the Property & Casualty Executive Committee approved and implemented a phased plan for a step-by-step withdrawal from thermal coal.
The different sectors with our current exclusions are shown below. For further information, we would refer to our sustainability report.
Additionally, we rule out any new oil and gas drilling projects in the U.S. Arctic National Wildlife Refuge as well as any other drilling projects related to oil and gas exploitation in Arctic regions in our facultative division.
Hannover Re has been a signatory to the Principles for Sustainable Insurance (UNEP FI PSI) since 2021. As part of our sustainability report, we publish the mandatory annual public disclosure of progress. You can find more information here.
ESG in asset management
Aside from the direct impacts on society, we are able to play a positive part in sustainable development through our investing activities by pursuing an investment policy that avoids companies, which do not satisfy our ethical expectations or environmental and social standards. In this way, we live up to our aspiration to be a responsible investor and at the same time make our contribution to sustainability in the financial industry. Investors, analysts and clients are also increasingly interested to see how we respect social sustainability concerns in the management of our investments.
In our investments, we’ve been applying ESG criteria since 2012 through our Responsible Investment Policy. Issuers that are involved in activities which may cause severe environmental damage are not only excluded from our investment activities but also subject to divestment. The different sectors with our current exclusions are shown below. For further information, we would refer to our sustainability report.
Hannover Re has been a signatory to the Principles for Responsible Insurance (UN PRI) since 2020.
Our new climate strategy
In 2020, we worked with other Group entities to develop a medium- to long-term climate strategy on the investment side.
Our strategy is founded on three pillars:
- Decarbonisation of our liquid investment portfolio by 30%
- Investment in sustainable investments
- Engagement activities