Principles for Sustainable Insurance: Risk Management and Value

Abstract

Some of the largest global insurers are actively pursuing the recently enacted Principles for Sustainable Insurance (PSI). While the concept of sustainability is often associated with a governance design that promotes stakeholder value, the PSI do not appear to be a call for stakeholder‐focused insurers. Rather, the PSI appear to be about internalizing tacit claims in the operations of insurers. Conceptual and empirical literature on shareholder value maximization suggests that when an insurer honors its tacit claims the value to shareholders increases. A key insight from practice is that a sincere pursuit of the PSI will expand the scope of corporate risk management.

Determinants of insurance companies' environmental, social, and governance awareness

“…Scordis et al (2014), discussing CSR for the insurance sector, do not find a stakeholder orientation in Principles of Sustainable Insurance; rather, the authors argue that PSI seem to advocate governance actions likely to clarify shareholder value. In line with conceptual and empirical literature (Jiao, 2010; Loderer et al, 2010; Surroca et al, 2010) suggesting that managers maximize shareholder value by honoring tacit claims (Zingales, 2000), Scordis et al (2014) state the PSI by calling for consideration of ESG issues in insurance operations presents an attempt to internalize tacit claims and increase value to shareholders.…”

“…In 2012 they launched the Principles for Sustainable Insurance (PSI) to focus on embedding ESG issues in insurance decision‐making. In addition to raising awareness of the ESG agenda with clients and business partners, and promoting action with governments, regulators, and key stakeholders (Scordis et al, 2014). More recently, the PSI ESG Guide for nonlife insurance (UNEP‐FI PSI, 2019; 2020) represents the first insurance guide on ESG issues aimed at raising awareness of the potential benefits of ESG integration in the insurance business model.…”

Future of Insurance 4.0 and Insurtech

“…The principles were launched during Rio+20-This composition of the coalition is of most publicly traded companies, insurance industry associations, and United Nations' officials. 105 There are just four principles. A sustainable insurer should 106 :…”

Green Insurance: A Roadmap for Executive Management

“…However, academic literature on how to apply these standards in practice in everyday insurance operations is scarce. Scordis et al (2014) are among the first to put the PSI in relation to the (general) literature on sustainability and value maximization. More recently, Gatzert et al (2020) provided an overview of relevant sustainability risks and opportunities in the insurance industry.…”