Insurance sector regulator, The National Insurance Commission (NAICOM) has charged directors of insurance companies to take responsibility of the implementation of environmental, social and governance (ESG) principles in their different institutions.
The Commission said, situations where insurance directors will claim ignorance or non-participatory to compliance issues in organisation’s they sit on their board was not going to be allowed.
The Commission said during the Insurance Directors Conference held in Lagos with the theme ‘Driving Insurance Sustainability through Innovations and Performance: Directors’ Engagement”, that the economic landscape is evolving with accompanying challenges, threats and opportunities.
Sunday Thomas, commissioner for Insurance/CEO, NAICOM said it is important for Boards to put in place policies and measures that will encourage observance of ESG principles and standards as not doing so constitute a shared risk to insurers, businesses, governments and society.
Thomas said sustainable insurance entails conducting all activities in the insurance value chain in a responsible and forward-looking way by identifying, assessing, managing and monitoring risks and opportunities associated with environmental, social and governance issues.
“The whole essence is to reduce risk, develop innovative solutions, improve business performance, and contribute to environmental, social and economic sustainability.”
“Some of these issues are now considered as likely to be financially material to the success of organizations, thus the compelling need for innovation and collaborative action.”
Thomas listed the four principles for sustainable insurance, to include the commitment of the signatories to ensuring decision-making along ESG criteria; raising awareness with clients and partners on ESG criteria; collaboration with governments and regulators to promote action on ESG criteria; and accountability and transparency of progress in ESG implementation.
“The corresponding list of possible actions provide a common anchor and framework for the insurance industry to manage ESG issues. This is expected to enhance the industry’s contribution to building resilient, inclusive and sustainable communities and economies.”
In 2022, a diagnostic study of the Nigerian insurance industry was conducted by Genesis-Analytics in collaboration with the Commission and FSD Africa to assess the extent of incorporation of ESG principles, identify gaps and areas of improvement in relation to ESG risks in Nigeria and other two African countries.
The study was to also support the regulators to develop ESG toolkits as well as integrate ESG principles and targets into the supervision of the insurance sector in those countries.
To give effect to the report of the diagnostic study, the NAICOM constituted an internal Committee to develop the framework for ESG observance in the Nigerian Insurance industry.
Thomas said also that in the meantime, the Commission rather than compel observance intends to offer regulatory incentives in order to encourage voluntary observance of the ESG principles by insurance institutions.
To the directors, he said the Commission is not unmindful of the challenges that your companies may face in the drive to implement sustainability principles.
“Insurance companies can overcome the challenges in implementing sustainable practices by taking a broad approach to managing sustainability risks and opportunities, incorporating sustainability into their operations, adopting green initiatives and ESG principles, engaging with clients and customers, and responding to stakeholder pressure.”