Short-term Insurance Strategic Risk Forum Short-term Insurance Strategic Risk Forum Sustainability...

Short-term Insurance Strategic Risk ForumShort-term Insurance Strategic Risk Forum

Sustainability of the Short-Term Insurance IndustrySustainability of the Short-Term Insurance Industry

The Strategic Risk ForumEducation

Collaboration

Response

Business

Presented by: John MelvilleExecutive Head: Risk Services, Santam

Chairman of the SAIA Strategic Risk Forum

11th June 2012


• 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 InsuranceStrategic Risk Forum

THE ROLE OF INSURANCE IN THE ECONOMYTHE ROLE OF INSURANCE IN THE ECONOMY


Driven by the growing interconnectedness between the physical, economic and social

environments in which we live


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 CHALLENGEKEY CHALLENGE


S

E


TOP 10 STRATEGIC ECONOMIC SOCIAL GOVERNANCE RISKSTOP 10 STRATEGIC ECONOMIC SOCIAL GOVERNANCE RISKS

THERE ARE STRONG LINKS TO THE RISKS IDENTIFIED BY THE NATIONAL PLANNING COMMISSION

GE

SS

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



KEY STRATEGIC QUESTIONS FOR USKEY 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


STRATEGIC RISK FORUMSTRATEGIC 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


COLLABORATIVE KNOWLEDGE SHARING AND PLANNINGCOLLABORATIVE KNOWLEDGE SHARING AND PLANNING

1, 2nd Sept, 2011

17th Nov. 2011

Investing for Adaptation and mitigation

7th March 2012


THE STRATEGIC RISK FORUMTHE STRATEGIC RISK FORUMSTI Risk Drivers

DashboardChanging Landscape

SAIA: Position Paper

Industry solutionSAIA: Trading

BriefOther

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


THE FOCUS AREASTHE FOCUS AREAS


Active engagement with the representatives in the value chain

FIA, SAIA, SAUMA, IISA, National Treasury, FSB, Scientists,

academics, government, NGO’s


AGRI INSURANCE PPPAGRI 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


CROP INSURANCE IN SOUTH AFRICA – CROP INSURANCE IN SOUTH AFRICA – LOW CURRENT MARKET PENETRATION LEVELSLOW 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% HailItaly 165 115 280 19% Hail / 1% MPCIRussia 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


SUSTAINABLE AGRI INSURANCESUSTAINABLE AGRI INSURANCEWHY: 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 farmers5. Comprehensive coverage

benefiting individual farmers6. Operated through specialised

crop insurers

Cimate ChangeWeather Risks

Cimate ChangeWeather Risks Market RisksMarket Risks

Agrifinance and AgribusinessFarmers

Public Sector

Specialised crop insurers

PPP

cropinsurance

Proposed solution: Public-Private Partnership (PPP)



BusinessPPP initiation

May 2012

Collaborate Q1 2012

UnderstandNov 2011

Establish principles with NDMC and SALGA for a cooperation

agreement

Develop MOU with CoGTA

360 DEGREE VIEW OF OUR CHANGING LANDSCAPE360 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)


Enabled by collaborating effectively with the many stakeholders involved in managing risks

(Industry representatives, CSIR, UCT, government etc.)

Strategic Risk Forum Think Tank



COMMUNITY RISK INSURANCECOMMUNITY 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 RiskLocal human capital development

Shared risk through PPPPilot

• 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


PRINCIPLES FOR SUSTAINABLE INSURANCEPRINCIPLES 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


WHAT ARE THE PRINCIPLES FOR SUSTAINABLE INSURANCE?WHAT ARE THE PRINCIPLES FOR SUSTAINABLE INSURANCE?

Embed in our decision-making environmental, social, and governance

issues relevant to our insurance business

PRINCIPLE 1 PRINCIPLE 2

PRINCIPLE 3

PRINCIPLE 4

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 solutionsPSI


CAN WE REALLY MAKE A DIFFERENCE?CAN WE REALLY MAKE A DIFFERENCE?




LOCAL EXAMPLE: BUSINESS AGAINST CRIMELOCAL 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 Success is evident in the evident in the fight against fight against

crimecrime

Source: BAC


CALL TO ACTION!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



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?WHAT CAN YOU DO?

BE A SPOKESPERSON FOR THE TRUE VALUE OF INSURANCE



THANK YOU

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