Zurich, Switzerland
The Geneva Association’s Programme on Regulation and Supervision (PROGRES) Seminar is an annual platform for needed conversation between insurers, policy makers, regulators and supervisors on key policy and regulatory topics.
Discussions at the 2020 PROGRES Seminar underlined that the different priorities of customers, insurers and regulators are not necessarily mutually exclusive ones: financial stability and economic growth; consumer fairness and innovation; sustainability and profitability. By bringing together a range of perspectives, the PROGRES Seminar looks for common ground on what actions can ultimately improve peoples’ lives and ensure a thriving insurance sector at the same time.
The Seminar employed a variety of formats – panel sessions, a fireside chat, breakout groups and a keynote speech – to address a range of topics linked to the seminar’s theme, ‘Insurance for a Better World’. The following are the key takeaways of each session.
Summary
Session 1: The contribution of insurers to achieving the UN Sustainable Development Goals (SDGs)
Participants
Moderator: Bill Marcoux, Chair of the Working Group on Law, Regulation and Resilience Policies, Insurance Development Forum
Charles Brindamour, CEO, Intact Financial and Chairman, The Geneva Association
Gabriel Bernardino, Chairman, EIOPA
Butch Bacani, Programme Leader, UN Environment Programme Finance Initiative (UNEP-FI)
Vicky Saporta, Chairperson, International Association of Insurance Supervisors (IAIS)
Charles Brindamour, CEO, Intact Financial and Chairman, The Geneva Association, participates in a panel session on the UN SDGs
A panel of distinguished participants explored the role and commitment of the insurance industry in making the SDGs a success and the world a better place to live.
• The SDGs in seven words: ’prosperity for all on a healthy planet.’
• Many SDGs stem from increasing economic inequality – an issue where insurers, as providers of protection against existential risks such as premature death or the disability of a family’s breadwinner, make a difference.
• The insurance sector has many touchpoints with the SDGs, but they should focus their efforts where individual companies can ‘move the needle’. It’s important that sustainability does not become a mere ’governance check’ or a matter of disclosure.
• The new International Association of Insurance Supervisors (IAIS) strategic plan is well aligned with a number of the SDGs: inclusion, innovation, infrastructure and climate.
• Although the mandate of insurance supervisors is policyholder protection, several initiatives engage the industry on sustainability, e.g. climate disclosures and stress-testing.
• Realizing the SDGs can potentially generate USD 12 trillion in value across four sectors (energy, cities, food and agriculture, health and well-being) and create 280 million additional jobs, mostly in developing countries, by 2030.
Fireside chat
Participants (pictured below)
Moderator: Hannah Wise, Anchor, CNN Money Switzerland
Jonathan Dixon, Secretary General, IAIS
Jad Ariss, Managing Director, The Geneva Association
The Geneva Association has aligned its research roadmap with a new tagline, ‘Insurance for a better world’. Its research roadmap now consists of seven work streams: Climate Change & Emerging Environmental Topics, Health & Ageing, Socio-economic Resilience, New Technologies & Data, Cyber, Evolving Liabilities and Public Policy & Regulation.
At the same time, the IAIS’ new five-year strategic plan shifts away from the post-financial crisis agenda to developing supervisory standards on emerging and accelerating issues with relevance to socio-economic development. It addresses five strategic themes: Climate Risk, Financial Inclusion & Sustainable Economic Development, Technological Innovation, Cyber Resilience and Conduct & Culture.
The two organisations’ agendas are converging on a number of issues, from different yet complementary angles.
A fireside chat with Jad Ariss, Managing Director of The Geneva Association, and Jonathan Dixon, Secretary General of the IAIS, revealed opportunities for collaboration between the insurance industry and the IAIS when dealing with these issues. Supervisory approaches need to strike an appropriate balance between financial stability, insurance market development and customer protection, and be proportionate so that insurers can provide customers with the products they need.
Session 2: Ethical issues related to the use of artificial intelligence and big data analytics in insurance
Participants (pictured below)
Moderator: Frank Grund, Chief Executive Director Insurance, BaFin
Birny Birnbaum, Director, Center for Economic Justice
Lorena Jaume-Palasí, Executive Director, The Ethical Tech Society
Vincent Loy, Assistant Managing Director (Technology), MAS Singapore
Lutz Wilhelmy, Risk & Regulation Advisor, Director, Swiss Re
Digitalization and the use of artificial intelligence (AI) are changing the way we live, communicate and do business and the way insurers do their job. Notwithstanding the significant benefits connected to the use of AI and big data analytics (BDA), a number of ethical issues and concerns need to be addressed.
• ‘Fairness’ in insurance means setting prices based on cost; avoiding intentional or unintentional discrimination; and adhering to the principle of risk pooling.
• In considering the merits of self-regulation vs hard regulation approaches to data ethics, according to an audience poll, a little more than the majority of participants favour ‘self-regulation’.
• Particularly in the context of new technologies such as AI and BDA, the self-regulation approach enables companies to deal with issues more quickly, compared to hard regulations, which take a long time to develop. In particular, self-regulation can come in the form of corporate governance.
• Two thirds of the audience considered it fair for insurers to use behavioral data to exploit customers’ willingness and/or ability to pay.
Session 3: Climate-related financial disclosures: paving the way for climate action
Participants (pictured below)
Moderator: Dave Jones, Senior Director, The Nature Conservancy and former California Insurance Commissioner
Maryam Golnaraghi, Director Climate Change and Emerging Environmental Topics, The Geneva Association
Mike Kreidler, Office of the Insurance Commissioner, Washington State
Jennifer Waldner Grant, Chief Sustainability Officer, AIG
Martin Weymann, Head Sustainability, Swiss Re
A recent IAIS-SIF (Sustainable Insurance Forum) survey indicated that awareness of climate change risks among insurers is high, but awareness and understanding of the recommendations by the Task Force on Climate-related Financial Disclosures (TCFD) is relatively low. Against this backdrop, the panel addressed the adoption of the FSB TCFD recommendations among insurers, the respective challenges insurers face and whether TCFD disclosures should be mandated.
• The TCFD promotes transparency and offers investors valuable information.
• The TCFD discussion is overly focused on insurers providing information, while the disclosures were initially intended to furnish investors (including insurers) with information, for example, on energy or airline companies.
• The TCFD's biggest impact is to help insurance companies move their climate agenda away from a 'marketing' approach to a more holistic and strategic approach.
• The panel was divided as to whether TCFD uptake should be mandatory. Since completing the TCFD disclosures is a significant effort, a phased approach would accommodate companies that are still learning to adopt the framework.
• When it comes to transitioning to a low-carbon society, the problem is not a lack of will but a lack of know-how. In order to address this, governments, private-sector players, the insurance industry and academia need to work together.
Keynote speech: A view from the United States on Global Insurance Markets
Bimal Patel, Assistant Secretary, U.S. Department of Treasury
Assistant Secretary of the Treasury, Bimal Patel, emphasized the importance of insurance trade agreements (’covered agreements’), in particular the recent US-EU covered agreement. He pointed to the Financial Stability Oversight Council’s work related to the activities-based approach to systemic risk (as opposed to the entities-based approach) and to new and emerging risks, and the way U.S. Treasury addresses them. Of these emerging risks, cyber is a crucial one, not least because of the threat to critical infrastructure. Long-term care is another priority for the Treasury, and a new task force will focus on federal policies that complement those at the state level.
Finally, Treasury expects to fully engage with the IAIS on improving the international Insurance Capital Standard (ICS). Mr Patel indicated that the extent of US private sector participation in the monitoring period should be similar to its engagement in past field testing.
Breakout session 1: The Evolving Cyber Frontier – Insurability, cyber terror, cyberwar and hostile cyber activity
Participants (pictured below)
Moderator: Rachel Anne Carter, Director Cyber, The Geneva Association
Yuval Porat, Founder and CEO, Kazuar
Chuck Jainchill, Cyber Product Development leader, AIG
Paddy McGuiness, CMG OBE, Senior Adviser, Brunswick Group and former UK Deputy National Security Adviser
This session discussed cyber terror and cyber warfare from a technical, policy and insurance angle, the changing nature of cyberattacks and what this means for insurance.
• There is a major rise in the sophistication of attacks as well as a significant proliferation of capabilities, both at the end of state actors as well as criminal organizations.
• At the same time, cyberattacks are increasingly targeted, and corresponding damages more costly.
• Damages from cyberattacks are also evolving and potentially include the loss of lives, massive damage to infrastructure and the ability to destabilize companies and societies.
• With cyber insurance, acts of war are excluded from cover; cyber terrorism, however, is generally covered. The difficulty is in distinguishing cyber terrorism from cyberwar. There is also the complexity of cyber attribution.
• When companies experience a ransomware attack, paying the ransom may encourage adversaries, but on the other hand, many companies confronted with such an attack do not really have a choice. Most insurers cover ransom, with the expected benefit that this engages experts and helps mitigate the risk.
• Diversification does not exist for cyber as it does for NatCat: a large-scale event could affect many across the globe simultaneously. Pools can exist on national levels but the transnational nature of cyber requires an approach beyond national pools. A form of ‘backstop’ is needed.
Breakout session 2: Geopolitics – Trade wars and their impact on insurance
Participants (pictured below)
Moderator: Kai-Uwe Schanz, Deputy Managing Director, Head of Research & Foresight, The Geneva Association
Karel van Hulle, Professor, KU Leuven and Goethe University Frankfurt
David O’Sullivan , Former Ambassador of the European Union to the US and Senior Counsel Steptoe & Johnson
This session explored evolving international trade relations and how they affect insurance.
• Insurance (excluding reinsurance) is local in nature. But the line between goods and services is blurring as more services are now embedded in goods (for example, liability insurance).
• Trade tensions between the US and China as well as Brexit are examples of moves towards deglobalisation – which is harming the global economy.
• Insurance treaties negotiated between the US and Europe have been difficult but will bring significant benefits to all parties.
• In Europe, the single financial market creates market access for insurers through either cross-border selling or through the establishment of subsidiaries. Solvency II and rules on group solvency entail the possibility of granting partial or full equivalence to third countries. If the UK does not obtain equivalence and free market access, it will have to negotiate with each EU member state. China is an example of a jurisdiction that seeks equivalence with Solvency II in order to gain access to the European market.
• There is a need for clear rules on trade in insurance. The WTO is the only place where all relevant parties sit together. Not expanding free trade in services, including insurance, will bring significant costs to the global economy.
Session 4: International standards on capital coming closer – How will they contribute to growth and resilience?
Participants (pictured below)
Moderator: Martin Hansen, Managing Director, Regulatory Policy, AIG
Elise Liebers, Chair of the Policy Development Committee, IAIS
Norio Hida, Deputy Commissioner for International Affairs, Financial Services Agency of Japan
Panos Charissiadis, Senior Manager Public Affairs, Munich Re
Joe Engelhard, Senior Vice President & Head, Global Regulatory Policy Group, MetLife
This panel addressed some of the open questions surrounding the major standards developed as part of the post-financial crisis policy agenda, including the Insurance Capital Standard version 2.0 (ICS 2.0).
• The participation of Internationally Active Insurance Groups (IAIGs) during the monitoring period of ICS is important, so they can provide feedback and influence the process.
• Industry participants indicated that the IAIS’ 2023 economic impact study may be too late for the results of this exercise to be considered in the design of the ICS, and that a robust impact analysis should be comprised of several comprehensive and multifaceted studies.
• Panel participants from the supervisory community pointed to the ICS as one of several ‘tools in the supervisory toolbox’ and a new lens through which the capital of an insurance group can be assessed, but not a replacement for solo, legal entity-based approaches.
• Industry participants pointed to the importance of the ability to use internal models under the ICS. It was confirmed that internal models are considered to be a viable option.
• The IAIS is establishing an infrastructure task force to analyze whether infrastructure investments should be addressed within the ICS.