How to improve the "green content" of the insurance industry

■Reporter Wang Lin "China Energy News" (2024-04-29 14th edition)

　　On April 16, the State Administration of Financial Supervision and Administration, the Ministry of Industry and Information Technology, and the National Development and Reform Commission jointly issued the "Notice on Deepening Manufacturing Financial Services to Help Promote New Industrialization" (hereinafter referred to as the "Notice") pointed out that it will vigorously promote the development of green finance and support carbon emission reduction, green transformation, resource conservation and efficient recycling in the industrial field and the construction of a green energy system. Banking and insurance institutions should optimize the allocation of financial resources, thoroughly implement the innovation-driven development strategy, improve the science and technology investment and financing system that matches risks and returns, strengthen the financial services of the whole life cycle of science and technology enterprises, and help promote the development of new quality productivity.

　　In fact, in view of the characteristics of long-term investment, value investment and risk management expertise, the attributes of funds are naturally compatible with green investment, which can play a great role in the green industry, and directly promote the insurance industry in recent years to become more and more "green content" and green products more and more innovative.

　　■ It has both capital and security advantages

　　The "Notice" mentions that insurance companies should develop science and technology insurance, new energy insurance, climate insurance and other businesses, develop and promote cyber security insurance, and improve the level of insurance protection. Under the premise of controllable risks and voluntary business, insurance funds should provide long-term and stable financial support for strategic emerging industries through bonds, direct investment equity, private equity funds, venture capital funds, insurance asset management products and other forms.

　　According to the Insurance Association of China, in 2022, the number of green insurance products in the insurance industry exceeded 3,600, the scale of green bonds exceeded 500 billion yuan, 69 institutions established green finance management mechanisms and working groups, and 9 institutions joined sustainable insurance or responsible investment principles. As of the end of June 2023, the half-year premium income of green insurance was 115.9 billion yuan; The balance of insurance funds invested in green development-related industries was 1.67 trillion yuan, a year-on-year increase of 36%.

　　As an important branch of green finance, green insurance has brought impetus to the further development of the green finance market in mainland China. In an interview with China Energy News, Li Jing, Climate Change & Sustainability Partner and Director of ESG Management Office, Financial Services in Greater China, EY Greater China, said: "The 'quantitative indicators' of China's green finance development have been leading in the world, but there are still problems of insufficient quality, structure and efficiency. This is an important focus for promoting incremental innovation in green finance under the new situation. ”

　　Li Jing gave a set of data: "Energy, industry, transportation, construction, agriculture and land use, these five industries emit the most, and to achieve pollution and carbon reduction, improve energy efficiency and reduce energy consumption, a huge pool of capital is needed." Some analysts predict that the mainland will need about 148 trillion yuan to achieve carbon neutrality by 2060, but some analysts believe that this figure will exceed 400 trillion yuan. In addition to state funding, it is inevitable to introduce a large amount of social capital, and how to mobilize more capital, innovative financial instruments are indispensable. ”

　　From the perspective of the insurance industry, accelerating the supply of green insurance can comprehensively improve the coverage rate of insurance protection, and further enrich and optimize the team of green financial products. In addition, insurance funds have the characteristics of long-term and stability, which match the characteristics of the long development cycle of the green industry; Compared with investment and financing tools such as green loans and green bonds, green insurance also has the composite functions of investment and financing and risk protection, and has natural advantages in promoting green development.

　　■ "One insurance" with multiple functions

　　At the beginning of April, Ping An Property & Casualty Shanghai Branch successfully signed the industry's first environmental pollution liability insurance for a private enterprise in Pudong, Shanghai, to enhance the "green content" of insurance. Environmental pollution liability insurance, also known as "green insurance", is a special liability insurance based on the liability for compensation for damage caused to a third party by an enterprise in the event of a pollution accident.

　　Through the development of environmental pollution liability insurance, the rate mechanism, that is, "high risk, high premium, low risk, low premium", can be effectively used to assist enterprises to carry out investigation of environmental risks and hidden dangers, assess pollution risks, prevent problems before they occur, reduce the incidence of environmental pollution of enterprises, and improve the level of environmental risk management of enterprises.

　　The significance of the insurance business, represented by environmental pollution liability, is not only to pay compensation, but to seek to solve multiple problems through "one insurance", such as improving the green credit qualification of enterprises and realizing the linkage of insurance and loans, so as to maximize the value of insurance in the field of green finance.

　　Li Jing said: "In addition to this type of insurance, there are many innovative types of insurance, such as biodiversity insurance, green building energy conservation insurance, renewable energy insurance, and livestock and poultry manure disposal insurance to support rural areas, which provide financial support for enterprises and rural revitalization projects. ”

　　Obviously, "one insurance" and multiple functions are becoming the main direction for the insurance industry to increase the "green content". It is understood that Yingda P&C Insurance Shanghai Branch has created a new operation model of "insurance + technology", innovated and developed distributed photovoltaic power generation loss compensation insurance, and has provided a total of 14.67 million yuan of risk protection for new energy enterprises so far. MetLife has launched a new "Carbon-Friendly" points zone to encourage customers to use digital services to reduce their carbon footprint and integrate green office concepts into their workplaces.

　　■ Innovation-driven insurance "chasing green"

　　The insurance industry continues to innovate and increase the layout of green finance, on the one hand, in line with the general trend of global energy transition; On the other hand, it is affected by the intensification of the climate crisis. In recent years, disasters such as heavy rains, wildfires, and hurricanes have occurred frequently in many parts of the world, and insurance claims have risen in a straight line, impacting their underwriting and pricing capabilities. In this context, it is the general trend for the insurance industry to create new and creative products and solutions, and provide comprehensive services for climate risk protection and risk reduction by leveraging the professional advantages of the liability side and the asset side.

　　At present, parametric insurance has sprung up in foreign markets and has become the preferred type of insurance for most countries and regions to cope with the climate crisis. AXA, the world's largest insurance group, has established a global parametric insurance division to provide parametric insurance for a variety of climate risks.

　　General insurance determines the amount of compensation based on the size of the loss, while parametric insurance calculates the compensation based on the size of the event, and the claim settlement is rapid and can play the function of "timely rain". In other words, as long as the "triggering event" can apply for compensation, such as the temperature exceeds the heat wave threshold, the water level exceeds the flood threshold, etc., the insurance company can provide compensation and related services.

　　However, parametric insurance still needs to be used together because of the high frequency of claims. Kathy Bowman McLeod, director of the Rockefeller Foundation's Center for Resilience, points out that flexibility and speedy claims are both advantages and disadvantages, and parametric insurance must be used in conjunction with other options to reduce risk.

　　Jacob Bernstein, head of European venture capital firm Highland Europe, said that frequent natural disasters and a lack of corresponding innovation are causing the insurance industry to be in trouble, and the insurance industry urgently needs to achieve collaborative innovation in both climate and green.

　　Obviously, for insurance companies, actively seeking accessible and affordable solutions, and creating a win-win operating model for themselves and society, has become the driving force for the insurance industry to "go green".

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