Last year, Zurich North America appointed Mark Way as head of sustainability underwriting. Way leads the recently formed Office of Sustainability Underwriting, which “will approach climate change as both a risk and an opportunity when it comes to establishing underwriting strategy guidelines, engaging with our customers and working with sustainability partners,” said Zurich North America chief underwriting officer Brandon Fick.
But how exactly does sustainability underwriting work, especially as environmental stakeholders continue to closely scrutinize insurers? Can insurers truly use their influence to address the bigger issue of climate change? Are insurers even aware of the risks of climate change?
Insurance Business America spoke with Way to understand what it means to be a sustainable insurer. We also ask how Zurich’s stance on sustainability attracts young talent, and how insurance can take the lead in driving sustainability.
What does your role as head of sustainability underwriting entail?
I lead the Office of Sustainability Underwriting, which was formed when I joined Zurich North America in December 2021.
At Zurich, we believe we have a responsibility to contribute to addressing sustainability challenges facing society. We can maximize our contribution by driving it into our core business activities and supporting our customers as we transition to a net-zero and more sustainable future.
With that in mind, the Sustainability Underwriting team was formed with the express mandate to support Zurich’s business units in the development of the products and services our customers need now and in the future. That means understanding the current risk landscape as well as how it could change over time and how customers’ needs will change.
Much of the work relates to climate change, including both the physical and transition risks. By transition risk, we mean the risks brought on by the transition to a net-zero society by changes linked to policy and regulation, the legal landscape, technological, etc.
What does it mean to be a sustainable insurance company?
How we approach the topic of sustainability has evolved over the last 20 years or so. In the beginning, the focus was mostly inward looking, but now it has a greater emphasis on how insurers can help customers and society at large become more sustainable.
The internal operational issues, like managing your environmental footprint, remain. But increasingly we need to shift the focus of sustainability initiatives to include helping to manage customers’ risks as they strive to build sustainability into their business model. For example:
Effectively, to aim at true sustainability, an insurance company, or any other company for that matter, has to ensure that all aspects of its business are aligned with the prerequisites for a sustainable future. In the context of climate change, that means aligning with the 1.5°C future through the use of science-based targets etc.
How aware are insurers of the topic of climate change? What is Zurich doing to address climate change?
Across the insurance industry, there is awareness about the potential physical impacts of climate change, but there are different levels of engagement among insurers. There will probably never be full uniformity in the approach, however, the insurance industry has a unique voice and an important role to play when discussing climate resilience and risk management.
The insurance industry has always been at the forefront of addressing emerging risks (think: building codes in hurricane-prone regions and automobile safety testing), so those outside of the industry want to hear from us. And it is in our best interest to address climate risk head-on.
Action to tackle climate change is gaining momentum. We see the Biden administration starting to make progress on climate; we see the SEC (U.S. Securities and Exchange Commission) and NAIC (National Association of Insurance Commissioners) both active in the risk reporting area; and we see rising concern in many parts of the country as the increase in frequency and severity of weather events has devastating impacts. Our industry has a natural voice in this topic. For its part, Zurich has introduced a comprehensive strategy to address climate change.
Internally, Zurich has made strong progress and commitments to reducing our carbon footprint and improving our performance in other areas of sustainability. We’ve almost completely eliminated single-use plastics in our offices and significantly reduced emissions from air travel. Working with a renewable energy technology company, Zurich is helping U.S. employees access 100% clean renewable energy for their homes at either no cost or a potential savings.
We’ve also joined with two U.S.-based airlines to invest in the use of sustainable airline fuel. At the Zurich Group level, we have set a target of net-zero emissions in our operations by 2030, and we recently achieved the highest-possible ESG rating (AAA) from the MSCI ESG Ratings assessment.
Zurich was the first insurer to sign the Business Ambition for 1.5°C Pledge, which is aimed at limiting average global temperature increases to 1.5°C above pre-industrial levels. And we have played a leading role in the development of two industry-level initiatives that target net-zero emissions in both the core functions of underwriting and investments: Net-Zero Insurance Alliance and Net-Zero Asset Owner Alliance.
And, as mentioned, we are increasing our focus on how we can support our customers as they face physical and transitional climate change risks.
From your perspective, how does a company's commitment to sustainability affects its capacity to attract new talent?
In my experience, at Zurich and previous organizations, a sincere, visible and active commitment to sustainability is a major draw for young talent. I have heard this firsthand in multiple interviews with job candidates over the years. Millennials and Gen Z are looking for employment with organizations where they can see an alignment of values.
How can insurance lead the way for the rest of the financial services industry when it comes to driving sustainability and climate change resilience?
This has got to be about leveraging all our capabilities and our role as society’s risk manager. We are in an uphill battle if we truly want to avoid the worst impacts of climate change. We need to articulate and quantify the risk our customers face and will face through, for example, global warming, biodiversity loss, the protection gap and lack of access to risk transfer.
In the case of transitioning to a net-zero society, we need to understand what the potential technological solutions could be, understand the associated risk and how it can best be managed to encourage their development and implementation.
