Insurance sector challenges in the light of ESG. The case of Poland

Abstrakt

Recent scientific research confirms that climate change is a strategic topic, with environmental, social, and corporate governance (ESG) aspects becoming a decisive factor in business analysis and investment strategies. Additionally, regulatory and legislative changes put pressure on insurance companies to address climate risks. New European Union regulations give investors and consumers an opportunity to consciously decide whether to include ESG factors in their portfolios and contribute to their popularization. While the experience of investors with ESG is still limited, climate risk is now a top concern for insurance companies, with some managers seeing ESG as a growth opportunity. Compliance with sustainability requirements and incorporating ESG into insurance and investment products can help insurers attract a growing number of green-minded consumers and achieve a positive financial return on investment. By incorporating ESG factors into risk assessment and underwriting processes, insurers can limit their losses from the growing number and scope of climate risks. Pension funds and insurance companies, as investors with a long investment horizon, pay more attention to shareholder rights, risk, and their reputation.
The importance of this issue prompted the authors to undertake research aimed at determining the importance of ESG regulations and green transformation for the insurance sector, and identifying the challenges insurance companies are facing in this regard. The article is based on quantitative research, supplemented with individual in-depth interviews, and fills the research gap for Poland in terms of the insurance sector’s perception of the challenges of green transformation. The aim of this article is to present the concept of ESG, regulations and activities of the European Union in this area, indicating their impact on the insurance sector and identifying challenges. The research question formulated for the purposes of this study are the challenges of the insurance sector in the field of ESG. To analyze this issue, the research questions were asked whether the introduced ESG regulations have a positive impact on the local and European markets, whether the local insurance market is less prepared for green transformation than the European one, which customers are most interested in green insurance products, whether climate risk is a significant threat to the insurance market. The results of the research presented in this article indicate that the impact of climate risk on the activities of insurance companies is particularly important and provide answers to the research questions. The conducted research has confirmed, among others, that the interest of customers of Polish insurance companies in ESG aspects is at a medium level, with the highest one in the aspect related to sustainable development. The most important risk, according to brokers on the Polish market, are interruptions in electricity supplies and the liability of company authorities for management errors. The results also show that participants of the insurance sector in Central and Eastern Europe believe that the impact of the new ESG regulations on local markets will be rather low, but they estimate that the workload in implementing them will be disproportionate to the impact. They assess the market itself as somewhat prepared in terms of the offer of green investment products, with the demand for such products being low. However, according to them, climate risk is insurable to a low or medium degree.
EU regulations shape the Polish financial market, and the coming years will be crucial for ESG investments. Sustainable development can strengthen the position of the Polish financial market in the international arena. The need for dialogue between investors and business will grow, and the quality of reported ESG information will increasingly determine access to capital. Therefore, it will also indirectly support the transition of the entire economy to one based on the principles of sustainable development and increase the business attractiveness of the entire region.