Insurance and politics: An end of an era or a new beginning?

Insurance and politics: An end of an era or a new beginning? | Insurance Business New Zealand

Insurance and politics: An end of an era or a new beginning?

The following is an editorial by Alicja Grzadkowska, senior news editor at Insurance Business. To reach out to Alicja, email her at [email protected]

The relationship between politics and insurance has started on a new course after the events of the past year. Following the siege at the US Capitol in January, many insurers announced that they were taking a step back from certain involvements in the political sphere, with some stating that they would be suspending political contributions to lawmakers who voted to reject the Electoral College results that cemented then President-Elect Joe Biden’s victory over President Donald Trump, or ending PAC activity altogether, like AIG, which also said that it would be reviewing relationships with trade associations to make sure policies are aligned.

Meanwhile, other insurance companies have taken action by firing employees who were identified as participants in the storming of the US Capitol, or making statements condemning the actions of those involved.

In potentially the biggest move away from political activities seen during this time, global broker Aon said that it was ending its relationship with the Trump Organisation, after a tumultuous series of events that began when it received a subpoena in 2019 from New York’s insurance regulator about dealings with Trump’s family business.

Read more: Aon ends relationship with Trump Organisation

These moves seem to reflect a broader trend in the insurance industry, as insurers take stock of the global political stage and re-evaluate their priorities. This development has probably been a long time coming, considering that key issues impacting insurers, like the environment and the coronavirus pandemic, have become politically tinged as global leaders decide on different directions to take when it comes to climate change and the handling of the virus – approaches that sometimes exist in contrast to what insurers have identified as the right moves forward, given the clear risks associated with such perils.

Perhaps nowhere is this trend clearer than in insurers taking a clear stance on insuring projects that harm the environment. In recent weeks, the list of insurance companies revealing new climate policies and strategies have included Lloyd’s of London, which will be ending investment in thermal coal-fired power plants, thermal coal mines, oil sands, and new Arctic energy exploration activities as part of its sustainability targets; AXIS Capital, which will not provide insurance coverage or investment support to projects related to exploration, drilling, or the production of oil and gas in the Arctic National Wildlife Refuge; Marsh & McLennan, which aims to be carbon-neutral this year by reducing greenhouse gas emissions in its own operations and purchasing verifiable offsets; and Allianz, which revealed concrete interim targets for reducing greenhouse gas emissions in its investment portfolio of policyholder funds – marking the first time that the global insurer has done so.

Read more: Allianz sets climate aim for investments

While taking a clear side in the climate change ‘debate’ may in itself seem political, the reality is that insurers are now aligning themselves with the majority of the scientific community on the significant risks that climate change-related risks pose to their insureds, which are reflected in insurers’ own risk models (though notably, some critics say that insurers should still be doing more).

As for the coronavirus pandemic, insurers have, over the past year, been at the forefront of risk management as global leaders have determined when and how to reopen their societies and economies. Amid all of the various lockdown discussions, insurers have been providing critical advice to insureds on how to reopen their doors safely, while also keeping the risks in reopening without proper controls in place top of mind, since doing so could put employees and patrons in the path of the virus. This advice has been coming out at a steady pace from the industry, and has sometimes existed in contrast to the more lax perspectives of politicians on how to handle the virus.

Of course, the insurance industry has also maintained a key role in the political world that remains critical, seen through its influence in the discussions around the availability of flood insurance, for example, or its very necessary participation in the development of private-public partnerships to offer coverage to businesses in the wake of future catastrophes. However, these are often fact-based conversations where insurers bring their knowledge from the industry and contribute to bipartisan efforts to, again, reduce risks for individuals, businesses, and the industry itself over the long-term.

 

As the new year begins and the global political stage evolves, insurers would do well to avoid becoming embroiled in the shifting tides that often define politics, and instead, focus on the bigger picture by doing what they do best, which is providing valuable risk management and insurance support to insureds around the world.