Insurance Business and Sustainable Development

TL;DR

This paper explores the evolving risk management strategies in the insurance industry, emphasizing broader sustainability aspects beyond climate change, especially for small- and medium-sized insurers within the context of recent legislative developments.

Contribution

It highlights the importance of integrating diverse sustainability facets into insurance risk management, extending beyond climate change, with a focus on practical strategies for smaller insurers.

Findings

Climate change dominates current risk management focus.

Legislative initiatives influence insurance risk strategies.

SMEs face unique challenges in adapting to new regulations.

Abstract

In this study, we will discuss recent developments in risk management of the global financial and insurance business with respect to sustainable development. So far climate change aspects have been the dominant aspect in managing sustainability risks and opportunities, accompanied by the development of several legislative initiatives triggered by supervisory authorities. However, a sole concentration on these aspects misses out other important economic and social facets of sustainable development goals formulated by the UN. Such aspects have very recently come into the focus of the European Committee concerning the Solvency II project for the European insurance industry. Clearly the new legislative expectations can be better handled by larger insurance companies and holdings than by small- and medium-sized mutual insurance companies which are numerous in central Europe, due to their historic development starting in the late medieval ages and early modern times. We therefore also concentrate on strategies within the risk management of such small- and medium-sized enterprises that can be achieved without much effort, in particular those that are not directly related to climate change.