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Sustainability of the Short-Term Insurance Industry

Sustainability of the Short-Term Insurance Industry. The Strategic Risk Forum Education Collaboration Response Business . Presented by: John Melville Executive Head: Risk Services, Santam Chairman of the SAIA Strategic Risk Forum 11 th June 2012. THE ROLE OF INSURANCE IN THE ECONOMY.

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Sustainability of the Short-Term Insurance Industry

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  1. Sustainability of the Short-Term Insurance Industry The Strategic Risk Forum Education Collaboration Response Business Presented by: John Melville Executive Head: Risk Services, Santam Chairman of the SAIA Strategic Risk Forum 11th June 2012

  2. THE ROLE OF INSURANCE IN THE ECONOMY • A collective ‘safety net’ and a lever of economic and social development • A key enabler and transmission mechanism for economic activity • A catalyst in the financial and investment flows needed for sustainable development Short-term InsuranceStrategic Risk Forum

  3. KEY CHALLENGE AN INCREASING LEVEL OF SYSTEMIC RISK Source: WEF Global Risk report 2012 • Many people still do not have access to the collective ‘safety net’ and are therefore exposed to the increasing level of risk Short-term InsuranceStrategic Risk Forum Driven by the growing interconnectedness between the physical, economic and social environments in which we live

  4. TOP 10 STRATEGIC ECONOMIC SOCIAL GOVERNANCE RISKS Legislation & regulatory capacity • G • G • E How we manage our impact on the environment Image & reputation • G • E Lack of investment &maintenance of infrastructure SA insurance industry Information management • G • S Increased crime and corruption Dual economy • S • S • S Lack of transformation Human capital & skills No real market growth THERE ARE STRONG LINKS TO THE RISKS IDENTIFIED BY THE NATIONAL PLANNING COMMISSION Short-term InsuranceStrategic Risk Forum

  5. KEY STRATEGIC QUESTIONS FOR US • Do we sit passively and watch the world unfold for us? • OR • Do we act proactively to become shapers of risks by: • Understanding these risks • Sharing this knowledge • Developing strategic responses • Driving or contributing towards implementation Short-term InsuranceStrategic Risk Forum

  6. STRATEGIC RISK FORUM • SAIA AND FIA ESTABLISHED AN INDUSTRY FORUM TO: Engage on strategic risks to our sustainability Understand what is being done to mitigate these risks Initiate interventions collaboratively to mitigate these risks This initiative and decision was a world first and lauded by UNEP FI, and is now being followed in other territories – Brazil, Australia and New Zealand

  7. COLLABORATIVE KNOWLEDGE SHARING AND PLANNING 7th March 2012 17th Nov. 2011 1, 2nd Sept, 2011 Investing for Adaptation and mitigation

  8. THE STRATEGIC RISK FORUM 2 year rolling Global and local Stakeholder Analysis 2 year industry wide ESG Risk review STI Risk Drivers Dashboard Changing Landscape Steerco Strategic Risk Forum Strategic Risk Forum Environmental Social Governance Motor Reinsurance Governance, Controls, Technology Support , Information Management, Client Research Methodology, Central Analytics Enabling / dis-enabling frameworks/policies Global and local partners Expertise shift – Human Capital Development SAIA: Position Paper Industry solution SAIA: Trading Brief Other Value Chain Readiness Funding Delivery / Implementation methodology

  9. THE FOCUS AREAS • Active engagement with the representatives in the value chain • FIA, SAIA, SAUMA, IISA, National Treasury, FSB, Scientists, academics, government, NGO’s Short-term InsuranceStrategic Risk Forum

  10. AGRI INSURANCE PPP CROP INSURANCE CO-FINANCING PARTNERSHIP BETWEEN GOVERNMENT AND THE INSURANCE INDUSTRY TO: • enhance food security in SA • increase access to insurance and making farming more viable • incentivise responsible environmental practices by farmers • grow the crop insurance market • manage the ‘contingent liability’ on the national balance sheet

  11. CROP INSURANCE IN SOUTH AFRICA – LOW CURRENT MARKET PENETRATION LEVELS

  12. SUSTAINABLE AGRI INSURANCE WHY: Higher penetration in the crop insurance market = multiple benefits Proposed solution: Public-Private Partnership (PPP) Public Sector PPP crop insurance • Integrated in agricultural policy and law • Public co-financing of premiums and cat losses • Transparent, uniform terms and products • Open to all farmers • Comprehensive coverage benefiting individual farmers • Operated through specialised crop insurers Cimate Change Weather Risks Market Risks Specialised crop insurers Agrifinance and Agribusiness Farmers Short-term InsuranceStrategic Risk Forum

  13. 360 DEGREE VIEW OF OUR CHANGING LANDSCAPE • WHY: Insurance is a key point of leverage in building resilience in a changing landscape(Fire, drought, storms, flood, tremors) Establish principles with NDMC and SALGA for a cooperation agreement Strategic Risk Forum Think Tank Enabled by collaborating effectively with the many stakeholders involved in managing risks(Industry representatives, CSIR, UCT, government etc.) Develop MOU with CoGTA UnderstandNov 2011 CollaborateQ1 2012 Business PPP initiation May 2012 Short-term InsuranceStrategic Risk Forum

  14. COMMUNITY RISK INSURANCE WHY: Demonstrate how simple insurance can help break some of the poverty traps many of our communities find themselves in • Learn how to provide simple insurance in vulnerable communities who are not touched by insurance • Promoterisk management in the communities • Provide employmentto the unemployed (especially youth) • Partner with Dept. of Cooperative Governance using Community Works Programmes (CWPs) & promote financial inclusion Identification of key partners Design concept 2012 Community Risk Local human capital development Shared risk through PPP Pilot 2013 Robust public-private partnership Mechanism with municipalities Short-term InsuranceStrategic Risk Forum

  15. PRINCIPLES FOR SUSTAINABLE INSURANCE UNEP FI insurance commission established Global consultation on sustainable insurance PSI launch 2007 - 2010 2011 2012 Raised awareness of the contribution that the insurance industry is already making to sustainability and get the industry engaged on this topic March: SA hosted the first of these consultations on behalf of the African insurance industry December: A final set of PSI was agreed in Zurich, Switzerland PSI to be launched at the Rio+20 summit in just over a week’s time

  16. WHAT ARE THE PRINCIPLES FOR SUSTAINABLE INSURANCE? Embed in our decision-making environmental, social, and governance issues relevant to our insurance business PRINCIPLE 1 Work together with our clients and business partners to raise awareness of environmental, social and governance issues, manage risk and develop solutions PRINCIPLE 2 PSI PRINCIPLE 4 Work together with governments, regulators and other key stakeholders to promote widespread action across society on environmental, social and governance issues PRINCIPLE 3 Demonstrate accountability and transparency in regularly disclosing publicly our progress in implementing the Principles

  17. CAN WE REALLY MAKE A DIFFERENCE? Short-term InsuranceStrategic Risk Forum

  18. LOCAL EXAMPLE: BUSINESS AGAINST CRIME A CONDUIT FOR ENGAGEMENT BETWEEN GOVERNMENT & BUSINESS ON CRIME Success is evident in the fight against crime Source: BAC Short-term InsuranceStrategic Risk Forum • Support businesses in getting their own house in order in terms of crime prevention • Partner with government by sharing expertise, information, processes and technologies

  19. CALL TO ACTION! Let’s PROACTIVELY and POSITIVELY influence the world in which we do business Let’s get involved with the RISKS Short-term InsuranceStrategic Risk Forum There is the potential for the insurance industry to demonstrate its true value…

  20. WHAT CAN YOU DO? BE A SPOKESPERSON FOR THE TRUE VALUE OF INSURANCE Short-term InsuranceStrategic Risk Forum Get involved with others via the Forum to contribute, learn and apply knowledge regarding relevant risks in your business and broader environment Implement the Principles for Sustainable Insurance (PSI) and become a signatory Do your own risk assessment as recommended by the PSI

  21. THANK YOU

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