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Short-term Insurance Strategic Risk Forum
Sustainability of the Short-Term Insurance Industry
The Strategic Risk Forum Education
Collaboration Response Business
Presented by: John Melville Executive Head: Risk Services, Santam
Chairman of the SAIA Strategic Risk Forum
11th June 2012
Short-term Insurance Strategic Risk Forum
• A collective ‘safety net’ and a lever of economic and social development
• A key enabler and transmission
mechanism for economic activity • A catalyst in the financial and
investment flows needed for sustainable development
Short-term Insurance Strategic Risk Forum
THE ROLE OF INSURANCE IN THE ECONOMY
Short-term Insurance Strategic Risk Forum
Driven by the growing interconnectedness between the physical, economic and social
environments in which we live
Short-term Insurance Strategic Risk Forum
Many people still do not have access to the collective ‘safety net’ and are therefore exposed to the increasing level of risk
Source: WEF Global Risk report 2012
AN INCREASING LEVEL OF SYSTEMIC RISK KEY CHALLENGE
Short-term Insurance Strategic Risk Forum
S
E
Short-term Insurance Strategic Risk Forum
TOP 10 STRATEGIC ECONOMIC SOCIAL GOVERNANCE RISKS
THERE ARE STRONG LINKS TO THE RISKS IDENTIFIED BY THE NATIONAL PLANNING COMMISSION
G E
S S
S
G
G
G How we manage our impact on the environment
Legislation & regulatory capacity
Lack of investment & maintenance of infrastructure
Dual economy
Lack of transformation
No real market growth
Human capital & skills
Increased crime and corruption
Information management
Image & reputation
SA insurance industry
Short-term Insurance Strategic Risk Forum
Short-term Insurance Strategic Risk Forum
KEY STRATEGIC QUESTIONS FOR US
Do we sit passively and watch the world unfold for us? OR Do we act proactively to become shapers of risks by: • Understanding these risks • Sharing this knowledge • Developing strategic responses • Driving or contributing towards implementation
Short-term Insurance Strategic Risk Forum
STRATEGIC RISK FORUM • SAIA AND FIA ESTABLISHED AN INDUSTRY FORUM TO:
Engage on strategic risks to our sustainability Understand what is being done to mitigate these risks Initiate interventions collaboratively to mitigate these risks
This initiative and decision was a world first
and lauded by UNEP FI, and is now being followed in other territories – Brazil, Australia and New Zealand
Short-term Insurance Strategic Risk Forum
COLLABORATIVE KNOWLEDGE SHARING AND PLANNING
Understanding ESG Risks • Environmental Risks –
Urbanisation • African Centre for Cities;
University of Cape Town • Social Risks • National Planning
Commission perspective • Governance Risks – ESG
on the bottom line • South African Association of
Chartered Accountants
Our changing landscape • Our changing landscape:
Cities • CSIR • Climate Change, Cities,
Risk • African Centre for Cities
University of Cape Town (UCT)
• Energy and Climate: Change is the new Normal (case study)
• Pretoria Portland Cement Company
• Building Sustainability Indicators
• Marsh Risk Consulting
Public Private Partnerships: National Disaster Management and STI Industry • Deputy Minister of
Cooperative Governance and Traditional Affairs (CoGTA)
• Chairman: Strategic Risk Forum
• Munich Re of Africa • Economist Agri SA • National Emergence Red
Meat Producers Organisation
• Santam • SALGA • The World Bank
1, 2nd Sept, 2011
17th Nov. 2011
Investing for Adaptation and mitigation
7th March 2012
Short-term Insurance Strategic Risk Forum
THE STRATEGIC RISK FORUM STI Risk Drivers
Dashboard Changing Landscape
SAIA: Position Paper Industry solution SAIA: Trading Brief Other
Enabling / dis-enabling frameworks/policies Global and local partners Expertise shift – Human
Capital Development
Value Chain Readiness Funding Delivery / Implementation methodology
Governance, Controls, Technology Support , Information Management, Client Research Methodology, Central Analytics
Steerco Strategic Risk Forum Strategic Risk Forum
Environmental Social Governance Motor Reinsurance
2 year industry wide ESG Risk review
2 year rolling Global and local Stakeholder Analysis
Short-term Insurance Strategic Risk Forum
THE FOCUS AREAS
Short-term Insurance Strategic Risk Forum
Active engagement with the representatives in the value chain
FIA, SAIA, SAUMA, IISA, National Treasury, FSB, Scientists,
academics, government, NGO’s
Short-term Insurance Strategic Risk Forum
AGRI INSURANCE PPP
CROP INSURANCE CO-FINANCING PARTNERSHIP BETWEEN GOVERNMENT AND THE INSURANCE INDUSTRY TO:
• enhance food security in SA
• increase access to insurance and making
farming more viable
• incentivise responsible environmental practices
by farmers
• grow the crop insurance market
• manage the ‘contingent liability’ on the national
balance sheet
Short-term Insurance Strategic Risk Forum
CROP INSURANCE IN SOUTH AFRICA – LOW CURRENT MARKET PENETRATION LEVELS
Country MPCI [m€] Hail [m€] Total [m€] Market Penetration [%]
USA 5.401 486 5.887 80% Canada 1.038 193 1.231 60% China 1.019 0 1.019 25 % Spain 430 0 430 55% (incl. Livestock) France 160 170 330 32% MPCI / 55% Hail Italy 165 115 280 19% Hail / 1% MPCI Russia 217 0 217 10% India 182 0 182 20% Brazil 142 39 182 12% Germany 5 159 164 61% (crop hail only) Argentina 3 116 119 45% Mexico 114 0 114 8% Australia 0 104 104 80% South Africa 21 72 93 33% Austria 20 68 88 79% Republic of Korea 56 0 56 72% Turkey 43 3 46 5%
Total 9.016 1.525 10.541
Short-term Insurance Strategic Risk Forum
SUSTAINABLE AGRI INSURANCE WHY: Higher penetration in the crop insurance market = multiple benefits
1. Integrated in agricultural policy and law
2. Public co-financing of premiums and cat losses
3. Transparent, uniform terms and products
4. Open to all farmers 5. Comprehensive coverage
benefiting individual farmers 6. Operated through specialised
crop insurers
Cimate Change Weather Risks Market Risks
Agrifinance and Agribusiness
Farmers
Public Sector
Specialised crop insurers
PPP
crop insurance
Proposed solution: Public-Private Partnership (PPP)
Short-term Insurance Strategic Risk Forum
Short-term Insurance Strategic Risk Forum
Business PPP initiation
May 2012
Collaborate Q1 2012
Understand Nov 2011
Establish principles with NDMC and SALGA for a cooperation
agreement
Develop MOU with CoGTA
360 DEGREE VIEW OF OUR CHANGING LANDSCAPE
WHY: Insurance is a key point of leverage in building resilience in a changing landscape (Fire, drought, storms, flood, tremors)
Short-term Insurance Strategic Risk Forum
Enabled by collaborating effectively with the many stakeholders involved in managing risks
(Industry representatives, CSIR, UCT, government etc.)
Strategic Risk Forum Think Tank
Short-term Insurance Strategic Risk Forum
Short-term Insurance Strategic Risk Forum
COMMUNITY RISK INSURANCE
WHY: Demonstrate how simple insurance can help break some of the poverty traps many of our communities find themselves in
2012 2013
Identification of key partners
Robust public-private partnership
Mechanism with municipalities
Design concept
Community Risk Local human capital development
Shared risk through PPP Pilot
• Learn how to provide simple insurance in vulnerable communities who are not touched by insurance
• Promote risk management in the communities • Provide employment to the unemployed (especially youth) • Partner with Dept. of Cooperative Governance using Community
Works Programmes (CWPs) & promote financial inclusion
Short-term Insurance Strategic Risk Forum
PRINCIPLES FOR SUSTAINABLE INSURANCE
2007 - 2010 2011 2012
Global consultation on sustainable insurance
March: SA hosted the first of these
consultations on behalf of the African insurance industry
December:
A final set of PSI was agreed in Zurich, Switzerland
Raised awareness of the contribution that the insurance industry is already making to
sustainability and get the industry engaged on this topic
UNEP FI insurance commission established
PSI to be launched at the Rio+20
summit in just over a week’s time
PSI launch
Short-term Insurance Strategic Risk Forum
WHAT ARE THE PRINCIPLES FOR SUSTAINABLE INSURANCE?
Embed in our decision-making environmental, social, and governance
issues relevant to our insurance business
Work together with governments, regulators and other key stakeholders to promote widespread action across society on environmental, social and governance issues
Demonstrate accountability and
transparency in regularly disclosing publicly our
progress in implementing the Principles
Work together with our clients and business partners to raise awareness of environmental, social and governance issues, manage risk and develop solutions PSI
Short-term Insurance Strategic Risk Forum
CAN WE REALLY MAKE A DIFFERENCE?
Short-term Insurance Strategic Risk Forum
Short-term Insurance Strategic Risk Forum
Short-term Insurance Strategic Risk Forum
LOCAL EXAMPLE: BUSINESS AGAINST CRIME
– Support businesses in getting their own house in order in terms of crime prevention – Partner with government by sharing expertise, information, processes and technologies
A CONDUIT FOR ENGAGEMENT BETWEEN GOVERNMENT & BUSINESS ON CRIME
Success is evident in the fight against
crime
Source: BAC
Short-term Insurance Strategic Risk Forum
CALL TO ACTION!
There is the potential for the insurance industry to demonstrate its true value…
Let’s PROACTIVELY and POSITIVELY influence the world in which we do business Let’s get involved with the RISKS
Short-term Insurance Strategic Risk Forum
Short-term Insurance Strategic Risk Forum
Get involved with others via the Forum to contribute, learn and apply knowledge regarding relevant risks in your business and broader environment Implement the Principles for Sustainable Insurance (PSI) and become a signatory Do your own risk assessment as recommended by the PSI
WHAT CAN YOU DO?
BE A SPOKESPERSON FOR THE TRUE VALUE OF INSURANCE
Short-term Insurance Strategic Risk Forum