Insurers have been urged to sign up to the Nairobi Declaration on Sustainable Insurance as a first step towards creating a sustainable insurance industry and to build resilience for the continent as a whole.
Speaking at a breakfast briefing for insurance CEOs in Nairobi, Kelvin Massingham, director – risk and resilience at FSD Africa, said there is a contribution insurers can make to the climate change and in producing better outcomes for Africa as a whole.
He stressed the importance of all businesses across Africa in engaging with the net-zero ambitions.
“The goal is net zero,” he said, “but we need to adapt to the changes that have already occurred. For insurers, that can be helping farmers with solutions to drought, making sure the finance is in place to help recovery.”
Mr Massingham also pointed out: “We are the most vulnerable continent and are home to 30 out of the world’s 40 most vulnerable countries. By 2050, Africa’s GDP will contract 30% if no action is taken on carbon emissions. Currently, a lot of African countries are already losing about 10% due to catastrophic events.”
The insurance industry exists to increase resilience, he said, so will play a vital role in building a sustainable environment for the future.
Mr Massingham encouraged insurers to identify the needs of customers and develop solutions to meet their needs and deliver greater resilience. But he added that insurers also have a key role in pointing capital to where it is needed most. “Project finance doesn’t exist without insurance,” he said. “It is important that we provide solutions to allow private investment to flow to green projects. The insurance industry manages a huge amount of assets. In Kenya, for example, there is KSH700bn that the insurance industry collectively manages and that money can be deployed a lot more effectively.”
That is what the Nairobi Declaration on Sustainable Insurance is about, he said. “It is to create an opportunity for organisations to commit to working towards these kind of things.”
However, Mr Massingham was realistic about the challenges ahead: “We realise that organisations are at different points on this journey so there are no minimum requirements for signing up. It is an initial commitment to working towards these goals as a business.
“We consider actions important. We are not interested in nice breakfasts, signing up online and nothing changes. What we are interested in is making sure the declaration has a market impact – on the way you deploy your assets, your market capital, the type of products that you develop, the strategies that you implement.”
There are a number of initiatives to support organisations on this journey, he promised. Among those are creating roadmaps for organisations. “If you are at the start of the journey, how do you create a strategy to implement this? So, there will be roadmaps, training and events to provide support.”
Added to that, FSD Africa will be working with regulators to create ESG guidelines for their regulated entities.
“It depends on the insurance industry”, he said. “You are the ones with the power to make a difference, with the balance sheets and underwriting capacity to drive change. The stated goal is 50 new signups by COP27.”
A website has been created to house information on the Nairobi Declaration on Sustainable Insurance here. It will provide case studies and examples to encourage insurance companies on the journey, as well as the opportunity for companies to sign up to the declaration.
Mr Massingham stressed that it can be hard for companies to sign up to such declarations, with short-term targets to achieve. But he is a firm believer that, looking at the bigger picture, “it is possible to not only look at the bottom line but also contribute to creating a safe and healthy resilient and sustainable society”.
He continued: “It ultimately will create more value for all the stakeholders.” He also recognised that sustainability can appear intangible and unrelated to short-term targets, however he made the case that it is highly relevant and should be a central part of how businesses operate.
There were big goals, he admitted, in creating a future for future generations and at the same time leaving nobody behind in the present.