The Growing Impact of Regulatory Issues on CSR in the Insurance Sector

While Corporate Social Responsibility is a major subject in the insurance sector, regulatory issues are still relatively unknown and will have a heavy impact on the sector in the coming years. We went to meet Valérie Loizillon and Sophie Laxenaire who co-founded Assurance for good in order to understand the issues related to CSR and in particular the growing weight of extra-financial reporting for the insurance sector.

What trends do you perceive from insurance players on CSR topics?
The commitment of insurers has evolved in recent years in line with the acceleration of the challenges that mark the 21st century: climate change, of course, which leads to the occurrence of increasingly extreme events. But also demographic growth, the rise of social inequalities and the multiplication of risks such as cyber, terrorist or health risks.
Another factor in the evolution of CSR strategies is increasingly strong external pressure from stakeholders: policyholders, employees, applicants, and the regulator, with regulations that have accelerated in recent years. .
In 30 years, we have thus gone from a commitment essentially centered on sponsorship, the financing of foundations and the support of associations, to a policy of commitment which is gradually being integrated into the heart of the company’s strategy and expresses across the entire insurance value chain.
Insurers are aware of the challenges that the current insurance model must face: increasing complexity in the risk modeling, increase in the cost of claims, change in the very nature of claims. It is by integrating their CSR policies more and more intimately into their activity and by developing it that insurers will be able to ensure the sustainability of their model.

What are the steps to implement to install a CSR policy?
Insurers, like any company, act on the 3 pillars of CSR: social, environmental, economic. Given the specificity of their activity, they will focus on 3 challenges: being a responsible organization, a responsible insurer and a responsible investor.
To deploy a CSR policy consistent with development issues, an essential prerequisite is the commitment of the top management which must demonstrate a sincere desire to integrate CSR at the heart of the company’s strategy and culture.
The first step is to draw up an inventory of existing practices. This diagnostic phase includes an inventory of stakeholder expectations and regulatory obligations.
The strategic CSR orientations established, the definition of the operational roadmap, quantified objectives and extra-financial performance indicators (KPI), is the second structuring step. KPIs make it possible to monitor and evaluate the effectiveness of CSR initiatives over time with regard to the ambitions set.
Once the roadmap has been established, the deployment of the CSR policy can begin. For it to be effective, it must be piloted, animated, and fully integrated into the company’s operations. Training all employees in CSR issues is a real lever here to ensure their adherence.
Finally, a CSR policy is part of a continuous improvement process. It must therefore be regularly challenged to ensure its relevance and effectiveness over time.

What are the future regulatory impacts for insurers?
At the World Climate Summit at the end of 2019 (COP25 in Madrid), the European Commission launched its “Green Deal for Europe”. This plan aims to make Europe the first climate-neutral continent, with net zero greenhouse gas emissions by 2050 compared to 1990 levels. economic actors who contribute to the ecological transition, the European Union has worked in recent years to establish a taxonomy and harmonize non-financial reporting practices to intensify the transparency requirements on the subjects of sustainability of the actors private.
The Corporate Sustainability Reporting Directive (CSRD) is the new European directive on non-financial reporting. It replaces and expands on the NFRD (Non-Financial Reporting Directive), transposed into French law by the Extra-Financial Performance Declaration (DPEF). With the gradual entry into force of the CSRD from 2024, European regulations are taking a turn by strictly regulating the publication obligations in terms of non-financial information. We will then talk about sustainability reporting.
What are the consequences for European companies and insurers?
First of all a change of scale with an extended field of application. Since the application thresholds for the CSRD have been lowered compared to the NFRD, it is estimated that nearly 50,000 companies will be impacted by this new regulation, compared to 11,000 previously.
The sustainability report will be published within the management report and audited by an independent third-party organization (OTI), with moderate assurance at entry into force to gradually move towards reasonable assurance.
The expected information is specified and standardized. The CSRD directive introduces new common European sustainability standards, requiring a large volume of indicators, both quantitative and qualitative. For each sustainability theme identified, companies will have to publish their policies, actions or action plans, objectives and measures. The objectives will have short, medium and long-term deadlines, with annual progress monitoring.
Finally, the directive reinforces the principle of double materiality which was already in embryo in the NFRD. A true foundation of the CSRD, this exercise allows companies to identify the company’s impact on sustainability issues as well as the impact of these issues on the development of the company.
The CSRD constitutes a major development for the companies that will fall within its scope of application: beyond the issues of availability and reliability of data, it involves a necessary increase in power of governance on the subjects of CSR and transformation of activity towards a more sustainable model.

What is your vision of the next few years on professions linked to CSR?
Faced with this regulatory development and the ever-increasing social and environmental challenges, professions related to CSR are evolving and taking on capital importance. These diverse challenges – climate, biodiversity, social inequalities, cyber-risks – require cross-functional skills, ranging from risk analysis to strategy, including reporting and auditing.
The question arises: who should bear responsibility for CSR? Previously, it mainly reported to the CSR manager, often historically attached to human resources. However, with the acceleration of regulations, such as the CSRD, and growing pressure from stakeholders, CSR has strategic and cross-functional dimensions more than ever. It becomes imperative to integrate CSR in all directions, including risk and finance.
The transformation of CSR-related professions is underway. We could witness a profound change in the CSR function or the emergence of new cross-functional roles, which combine skills in strategy, risk, finance and sustainable development.
This integrated approach will enable companies to deal effectively with CSR challenges and contribute more effectively to the transition to a sustainable economy.