Hong Kong Insurers Join Hands to Advocate Green Insurance Creating Brighter Future for All with Professional Expertise

31 March 2022

Eric Hui, CEO, Zurich Insurance (Hong Kong)

Task Force on Green Insurance steering industry best practice

Committed to green insurance and supported by insurance industry leaders, The Hong Kong Federation of Insurers (HKFI) established the Task Force on Green Insurance (the Task Force) in 2020, and has been engaging the HKFI members through webinars on best practices in green insurance. The Task Force has also connected with various stakeholders, e.g. The Green Finance Association and The Hong Kong Observatory, and is currently working with the Centre of Green & Sustainable Finance under the Cross-Agency Steering Group in the capacity building and data working groups.

Looking ahead, the Task Force will team up with an appointed consultant to build an industry charter, to facilitate the work on disclosure framework, and to propose a data management structure for data use across industries.

Importance of data in climate risk management

On the macro policy-making level, inter-governmental agencies have to make use of data for measurements and form their frameworks, policies or targets. Similarly, country governments develop their Nationally Determined Contributions (NDCs) based on data, and accordingly assign emission targets across trades within their economies.

In Zurich Insurance Group, one major application of data is the approach we structure our targets and strategies when making our impact investment which stood at USD5.8 billion in 2020 and helped avoid 2.9 million metric tons of carbon emission. By 2025, we aim to decrease carbon intensity in our listed equity and corporate bond investment by 25%, and by 30% in our direct real estate investments. It is all science and data behind the formulation and execution.

When working on climate risk governance and related disclosures, we very often bump into a number of data gaps, e.g. carbon footprint of SME’s, catastrophic damages by geospatial level, etc. Industries and corporates, along with our regulators, are working on such gaps by leveraging publicly available data and private service providers. It is indeed the opportunity for relevant consultants and startups to find their growth path by providing new data-related services for closing the gaps. As such, talents in the disciplines of ESG and climate data are welcome. Managing weather-related risks to sustain economies for the coming century is a core competence of the insurance sector. The insured loss data, catastrophe modeling, risk surveys and analysts of the industry will be tapped on for enriching the data required for climate risk management.

Hong Kong insurers contributing to “Net Zero” transition

All businesses can set operating targets for decarbonisation. It could be as simple as reducing the real estate footprint, the use of fossil-fuel power and air travel. In particular, insurers can do a great deal in digitalisation to reduce the use of paper. Trees are just indispensable to decarbonisation. With this belief, Zurich Insurance Group is running a major reforestation project in Brazil for alleviating carbon emission and preserving life species.

As a global risk management center and insurance hub, Hong Kong aims to be a preferred Insurance Linked Securities (ILS) domicile. The ILS market has got a very good start with its first catastrophe bonds issued, and is expected to grow with rising business opportunities in the region and along with the Belt & Road Initiative.

In the coming decade, we will see more new materials, new technology, new energies or new supply chains as driven by the “net zero” transition among various industries. Property and Casualty insurers are there to cover their clients’ risks arising from such transition processes.

Life and Savings insurers are no less important as they are instrumental to the sustainability of our community by promoting health, savings and annuity products. Insurers have been actively adding more ESG funds to their Investment-Linked Assurance Schemes (ILAS) products. Going forward, such ESG-based ILAS should be qualified under the Wealth Management Connect Scheme of the Greater Bay Area. Given the strength of the industry’s distribution capability, such qualification will certainly draw more investment toward the green movement.

There are so much more Hong Kong insurers can do, together with other financial sectors, to promote green and sustainable finance for our brighter tomorrow.

Mr Eric Hui
Immediate Past Chairman of the Hong Kong Federation of Insurers cum Chairman of the Task Force on Green Insurance
CEO, Zurich Insurance (Hong Kong)

* The above article only reflects the opinion of the writer and does not represent the positions of the Hong Kong Academy of Finance.