EY’s Santenac: Sector “ready and willing” to act on sustainability transition

The global (re)insurance industry has sent a clear message that it is both ready and willing to redirect capital to aid the transition towards net zero but concerns over adequate returns may slow progress, according to EY’s global insurance leader Isabelle Santenac.

Speaking to The Insurer TV as part of #ReinsuranceMonth, Santenac warned that there may be an imbalance between the supply and demand of so-called green capital flowing out of the insurance sector, adding that such investments are “not creating the returns required” to attract capital flow and attract attention.

“The sector has put its hands up to say ‘we are ready, willing and able to direct capital to the transition’,” Santenac said. “This is addressed specifically in the ambition of industry and trade associations, and also reflected by the fact that most of the large insurers have joined the Net-Zero Insurance Alliance.

“The sector manages $30trn of assets and can play a significant role in directing those investments towards green capital. Such funds could go a long way to financing the transition and tapping into long-direction financing.”

But Santenac added that the market is currently in the early stage of a “sudden step change” when it comes to green capital. She said that in order to secure the supply of capital needed to aid the transition towards net zero, policymakers and regulators will need to provide “confidence” to investors.

“This for sure is something that needs to be resolved as a matter of government policy, regulation and of course taxation, to give commitment to projects and confidence to investors,” Santenac explained. “It’s about creating that clarity on the market and then clearing out the obstacles in the way.”

To give confidence to the markets, there will also need to be clarity on commitments that go beyond the Paris Agreement and reflect the updated Intergovernmental Panel on Climate Change report and the enhanced Sustainable Development Goals that together will drive the most impactful position, she said.

The comments follow findings from a recent EY survey showing that more than 50 percent of consumers around the world feel that sustainability will be a key criteria for their decision making process when purchasing insurance products.

Santenac said the findings highlight the role the insurance sector must play in aiding the transition by ensuring buyers have the products they need.

She said the real role of insurance will be “behind the scenes”, adding that the sector is well-positioned to enable national schemes against climate change, to provide financial guarantees for the financing and the redesign of liability contracts, and cover for new “green” technology and power generation.

“It may not be flashy or headline-grabbing, but the real value of insurance is in freeing companies and people from uncertainties, and being there when needed,” Santenac explained.