Why is Insurance Important in achieving the Sustainable Development Goals (SDG'S) 2030?

Traditionally, the concept of insurance for development is mainly centred on risk mitigation solutions that improve socio-economic resilience, assisting nations to be better prepared for the financial impact of natural disasters. But the role of this industry has significantly widened in the last couple of years. More and more insurance companies have realized the prominence of sustainable investment strategies. 

 

They are informing their clients about the potential risks and benefits along with their long-term commitments. This will bring together regulators, policymakers and the insurance sector to raise awareness of the existing progress and discuss opportunities for the insurance sectors and investors backing the Sustainable Development Goals. 

 

What Are Sustainable Development Goals?

 

Sustainable goals are a collection of 17 global goals that are interlinked to each other. These goals are considered the blueprint for achieving a better life for all. These 17 goals include:

• No Poverty 
• Zero Hunger 
• Quality education
• Good health and well-being
• Clean water and sanitation 
• Gender equality 
• Decent work and economic growth 
• Affordable and clean energy 
• Reduced inequalities 
• Industry, innovation and infrastructure 
• Responsible consumption and production 
• Sustainable cities and communities 
• Life below water 
• Climate action 
• Life on land 
• Peace, justice and strong institutions 
• Partnerships for the goals 

How Can Insurance Companies Make A Difference?

Generally, the investment strategies of insurance companies are restricted by regulations and depend on various external and internal factors. Insurers need to invest conservatively. They need to ensure that they continue to be solvent and are able to pay policyholders at any time. Moreover, Insurers have a fiduciary responsibility to maintain or expand the value of the assets of the policyholders. Subsequently, this proves to be challenging on the investment strategies of the sector. 

 

Moreover, insurance regulators enforce risk-centric capital charges on investments to make sure there are sufficient capital levels to cover the liabilities of insurers. The higher the risk of investment, the more will be the capital charge. It is imperative to note that businesses are exposed to different kinds of risk based on their operational nature. This is the reason why financial risks related to liabilities and assets are managed separately by life and non-life insurers. 

 

Insurance through its products and services plays an important role in developing a sustainable environment. By insuring the community and business organization from uncertainties, the  sector helps in improving the living standards. Additionally, affordable insurance will allow better and more equal protection to the community. Insurance companies are increasingly developing products and services that address the needs of a constantly changing world and catering to versatile needs of people. 

Insurance Industry And Sustainable Development 

Insurance is rooted in real need wherein people are looking for a way to protect themselves and their loved ones from unpredictable financial shocks. The protection of people and assets is an imperative aspect to more inclusive, resilient and sustainable development. 

 

The COVID-19 pandemic has shown that unforeseen financial shocks can hinder the development progress. According to the World Bank report, there will be between 119 and 124 million people in the ‘poor’ category. Countries that need to have stronger safety nets can only deal with this situation better. 

 

The primary principles of sustainable insurance offer a global roadmap for development and expansion of the insurance solutions and risk management system. We need this to promote clean water, sustainable cities, renewable energy, and disaster-resilient communities.

With global volume of over $4trillion and more than 24 trillion worth global assets under management, insurers that focus on sustainability can catalyse the financial and investment movement required to achieve the sustainable goals.

The principles of sustainable insurance is the bedrock on which the industry and society can develop stronger relationships. A relationship that puts sustainability at the crux of risk management in the quest of achieving a better world.

In terms of sustainability, it is necessary to explore how risks and sustainability are connected and where the insurance sector plays a role in mitigating both traditional and emerging risks such as climate change, natural calamities etc. The involvement and contribution of the insurance sector in environmental sustainability concerns is easily summarized below:

 

With regards to sustainability, it is imperative to explore the relation between risks and sustainability and where the insurance sector contributes in mitigating risks. The contribution of the insurance section in sustainability concerns include:

• Insurance companies are the ones that settle different kinds of environmental losses both natural and man-made.
• Insurance companies hold the expertise in claim handling and risk management.
• They provide advice on loss prevention to organizations and the public.
• Insurers act as guardians by offering financial assistance to the community.
• The advent of the online insurance market has significantly reduced the paperwork, thereby saving the environment.
• The sector improves the living standard by extending innovative insurance products and services. 

The Bottom Line 

Insurance companies and regulators have determined a series of interlocking priorities for insurance looking ahead at 2030 that include climate changes, access to insurance, long-term investment, etc. Throughout the world, there is a wide variety of innovations by insurance companies, policymakers and multi-stakeholder initiatives that leverage insurance for sustainable development across various risk and investment dimensions.  

 

Share

Leave a Reply

Name

Email

Comment

Post Comment