Insurance persistently underrepresented in multilateral development agreements, paper finds

By Rebecca Delaney

May 2 - (The Insurer) - A new position paper has called out the “stark and persistent underrepresentation” of insurance in multilateral development agreements and recommended that the industry engage in greater innovation to complement market stability and market fixing policies.

The position paper on insurance and sustainable development was published on Thursday by the U.N. Sustainable Development Solutions Network.

The most recent global stock take found that just 16% of the U.N. sustainable development goals (SDG) are on track to be met globally by 2030, with the remaining 84% showing limited progress or a reversal of progress.

Finance remains a critical constraint, with the annual SDG financing gap currently standing at $4.2 trillion.

The position paper highlighted that the strengths of the insurance industry in fostering resilience and risk reduction receive limited attention in development agreements, leading to “stark and persistent underrepresentation” at a multilateral level.

Insurance is mentioned once explicitly in the SDG agenda, with the “decent work and economic growth” goal including a target to “strengthen the capacity of domestic financial institutions to encourage and expand access to banking, insurance and financial services for all”.

However, the indicators linked to this target largely relate to banking inclusion: the number of commercial bank branches per 100,000 adults; the number of automated teller machines per 100,000 adults; and the proportion of adults with an account at a bank or other financial institution.

“This banking centric focus means that the progress of insurance inclusion is not being effectively measured,” said the paper.

“It is unclear whether the organisations responsible for crafting these agreements have adequately considered the potential contribution of insurance. This may partly stem from a failure by the industry to effectively communicate the societal value of its solutions using language, data, and evidence that is meaningful to these organisations.”

Speaking on a webinar marking the launch of the paper, Ivo Menzinger, chair of the Insurance Development Forum’s operating committee, said: “Insurance has such an important gearbox function, such an important element for growth and economic development.

“It's a bit undervalued and assumed as given – but it's not, particularly in emerging and developing countries.”

The paper offered 11 design principles and 18 actionable recommendations to more effectively promote risk management and risk transfer solutions, to ensure that they are deployed across government policies and multistakeholder partnerships.

This included articulating the societal value of insurance by signalling increasing risks and removing the use of industry jargon, and introducing and strengthening public policies to shape insurance markets for sustainable development.

“This public sector recommendation is not about placing new compliance, disclosure, or risk management demands on the insurance industry,” said the paper.

“Rather, the focus of these policies should be to encourage and support the industry to innovate more, complementing market stability and market fixing policies.”

Also speaking on the webinar, Franziska Arnold-Dwyer, associate professor of law at UCL, highlighted the role of the insurance industry as a transmission channel for loss prevention finance, information and incentivisation.

“They can do so by building on existing products and services. In my view, this is not just a philanthropic or exclusively corporate social responsibility endeavour; in my view, that makes business sense too,” she said.