Joint position paper of the Association of German Public Insurers, the Federation of German Industries, the German Association of the Automotive Industry and the German Non-Ferrous Metals Association: Ensuring sustainable insurance cover for industry and commerce
Insurance cover for industry and commerce is of paramount importance for the real economy. Any new regulations should allow this business model to continue so that insurers (and industrial insurance captives) can continue to offer insurance solutions in full. Insurers and the real economy therefore draw the attention of international, European and national standard-setters, legislators and supervisory authorities to the following issues: Ensuring sustainable insurance cover for industry and commerce
- Companies in the real economy and in the insurance industry welcome the drive to strengthen the concept of sustainability.
- Moves to take sustainability factors into account must continue to ensure full in-surance cover for the corporate sector and should strengthen, not weaken, Germany’s status as an industrial hub. All permitted economic activities should continue to enjoy access to insurance cover to support them as they make the neces-sary transformation to sustainable business activity.
- Insurers already take relevant sustainability factors into account as part of their forward-looking risk management approach. The instruments already available are also ideally suited to ESG risks.
- Risk assessment and pricing (underwriting) is based on a two-stage process, with premium calculation based on economic risks on the one hand, and a strategic assessment, including a reputation-oriented ESG analysis, taking the insurer’s individual sustainability strategy into account on the other. These two steps are motivated by different factors and have to be kept strictly separate.
- The use of sector heat maps in underwriting would not be sufficiently granular, as well as being static with regard to transformation processes and much less precise than the case-by-case assessment described above. Exclusion criteria or investment limits based on heat maps are also not precise enough.
- In terms of investment, sustainable investments should be assessed based strictly on the risks they entail. Blanket capital relief measures (green supporting factor) or surcharges (brown penalising factor) contradict this central precept of financial stability.
- Wherever possible, climate policy should make use of direct measures, even if these are often politically unpopular. Opting for an approach that uses the steering effect of the financial industry, however, is an indirect approach. It takes effect more slowly, and only indirectly, is associated with higher compliance costs and also has its limits in terms of effectiveness.