Principles for Sustainable Insurance: Risk Management and Value

• Author: Yoshihiko Suzawa,Astrid Zwick,Lucia Ruckner,Nicos A. Scordis
• Published date: 01 September 2014
• DOI: http://doi.org/10.1111/rmir.12024
• Date: 01 September 2014

Risk Management and Insurance Review

C

Risk Management and Insurance Review, 2014, Vol.17, No. 2, 265-276

DOI: 10.1111/rmir.12024

PRINCIPLES FOR SUSTAINABLE INSURANCE:RISK

MANAGEMENT AND VALUE

Nicos A. Scordis

Yoshihiko Suzawa

Astrid Zwick

Lucia Ruckner

ABSTRACT

Some of the largest global insurers are actively pursuing the recently enacted

Principles for Sustainable Insurance (PSI). While the concept of sustainability is

often associated with a governance design that promotes stakeholder value, the

PSI do not appear to be a call for stakeholder-focused insurers. Rather, the PSI

appear to be about internalizing tacit claims in the operations of insurers. Con-

ceptual and empirical literature on shareholder value maximization suggests

that when an insurer honors its tacit claims the value to shareholders increases.

A key insight from practice is that a sincere pursuit of the PSI will expand the

scope of corporate risk management.

INTRODUCTION

The General Assembly of the United Nations in 1983 established a Commission to

consider global environmental aspects of development from an economic, social, and

political perspective. In 1987 the Brundtland Commission, as it became known, issued

its report (http://www.un-documents.net/our-common-future.pdf). The report estab-

lished the concept of sustainability as the process of formulating policy on the symbi-

otic relation between economic growth and environmental integrity. The legacy of the

Brundtland Commission has shaped much of the subsequent discourse on sustainability

including the Earth Summit conferences. The latest Earth Summit, The United Nations

Conference on Sustainable Development (or commonly called Rio+20 since it was a 20-

year follow-up to the first Summit also held in Rio), took place in 2012. During Rio+20 a

coalition of mostly publicly traded insurers, insurance industry associations, and United

Nations’ officials launched the Principles for Sustainable Insurance (PSI).

This article was subject to double-blind peer review.

Nicos A. Scordis is at St. John’s University; e-mail: scordisn@stjohns.edu. Yoshihiko Suzawa

is at Kyoto Sangyo University; e-mail: suzawa@cc.kyoto-su.ac.jp. Astrid Zwick is at Munich

Reinsurance Company; e-mail: azwick@munichre.com. Lucia Ruckner is at Munich Reinsurance

Company; e-mail: lrueckner@munichre.com.

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