Page 277 - India Insurance Report 2023- BIMTECH

India Insurance Report - Series II 265

approach that takes into account economic, social, and environmental factors, Singapore can continue
to drive sustainable development and create a more sustainable and resilient future for all.

The impact of climate change has been an area of particular focus in Singapore. Because of its
limited extension, geographic reality and location, Singapore is expected to be particularly affected by
climate change, both locally in terms of sea-level change, temperature and precipitation, as well as beyond
its borders in terms of energy and food security (Meteorological Service of Singapore, 2015). This has
translated into a coordinated action plan and extensive communication efforts (Climate Change Secretariat,
2016). For example, Singapore has engaged in an ambitious effort to transition to a circular economy
(Rezvani Ghomi et al., 2021). Sustainability reporting contributed to higher company valuations also in
Singapore, and independently of the type of company ownership (Loh et al., 2017). This focus on
environmental issues has facilitated the creation of specific executive development programs focusing on
green insurance (Pugnetti et al., 2022). Detenber et al. (2016) find that approximately half of the
Singaporean population is concerned about climate change, especially younger and better educated citizens.
Another third Is disengaged and pays little attention to global warming, believing that it will not harm
them personally. Finally, 15% of Singaporeans are passive. These tend to be older, less educated and less
wealthy Singaporeans. They are moderately worried about climate change but hold a strong belief in the
role of government in addressing the issue. These segments stand in contrast to those identified in other
countries, supporting the research into more insights.

1.1. Sustainability in Insurance

Insurance is worldwide a significant component of the economy, with premiums accounting for
some 9.4% of GDP in OECD countries in 2020 (OECD, 2022). It is part of vital business infrastructure,
enabling companies to better understand and manage risk. Insurance reduces the risk of poverty and
thus assumes a fundamental social role. It also orchestrates a vast network of service providers through
underwriting and claims management. Thus, private insurance can assist governmental authorities in
redesigning mitigation and risk transfer strategies for societies (Keskitalo et al., 2014; Muhamat et al.,
2017), and can be as effective as direct subsidies to drive innovation in sustainability in the overall
economy (Wang et al., 2017). Financial services companies can support and direct the transformation of
the whole economy, however, they do so in different measures. For example, the public stock market
(socially responsible investments and shareholder activism) has only a limited impact on the sustainability
of economic performance; lending and venture financing are more directly involved in a company’s
funding and have been shown to have a more direct and significant impact (Scholtens, 2006). Insurers
have responded in several ways to emerging climate risks beyond better predictive models for losses.
They have developed approaches to enable customers to improve their resilience and have developed
products to incentivize behavior, such as pay-as-you-drive automotive coverage. They have also become
more selective in their risk appetite, for example by excluding climate liability coverage. The curtailing
of risk transfer opportunities can send a strong signal to companies to change their behavior (Mills,
2009; Mills, 2012). Engagement in CSR has also been proven to improve insurers’ stability. A study of
94 listed insurance companies has linked higher Z-Scores and, therefore lower probability of default
with higher CSR scores, especially those linked with environmental and social efforts. Governance
efforts, on the other hand, were not seen as relevant for stability (Chiaramonte et al., 2020).