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What are non-financial ratings agencies looking for in insurance companies?

Non-financial ratings first appeared in the 1990s. They consist in evaluating listed companies on the basis of criteria other than purely financial data (profits and dividends), such as their social and environmental policy, governance or anti-corruption measures. Each business sector is analysed in light of its specificities.

What are non-financial ratings agencies looking for in insurance companies?

European insurance companies seem less likely to be hit by large fines and other scandals than companies in the banking sector. Nevertheless, there is still room for them to improve their approach to environmental and social risks, as both investors and insurers.

As investors, progress has been made through disinvestment in the coal sector.

Crédit Agricole Assurances has stopped investing in companies that make over 30% of their turnover from coal-mining activities and now proposes unit-linked SRIs[1] as part of its multi-product insurance policies. However, certain agencies are expecting companies to go further with regard to fossil energy sources.

In their core business of insurance, certain European companies continue to insure firms that operate in controversial sectors (tobacco, coal, gambling, etc). Ratings agencies expect insurers to select their clients carefully and to ask them specific questions, especially about their impacts on sustainable development (pollution, child labour, etc.), before doing business with them.

In relation to retail customers, non-financial ratings agencies rate the following practices highly:
-Design of products for disadvantaged populations
-Prevention actions (e.g. health and road safety).
-Adaptation of premiums to new products (e.g. renewable energy sources or clean vehicles) or to new practices (car-sharing).
Crédit Agricole Assurances addresses these issues through measures such as developing prevention within the Regional Banks, offering a “low-mileage” automobile insurance solution and charging no excess for green vehicles. 

While the design of insurance products is generally good, certain European companies are still found wanting at the subscription level, either by adopting overly aggressive sales pitches or by selling products that are too risky for the customers they are targeting. Responsible marketing requires transparency. At Crédit Agricole Assurances, opinions on CSR issues are given during meetings of the Committee for New Products & New Activities (CONAP).

The agencies also assess insurers’ behaviour as employers and corporate citizens. Many other aspects, such as reducing the number of business trips, establishing a work/life balance and integrating CSR targets into remuneration, also come into play. Indeed, CAA addresses the last of these aspects via the FReD CSR index which influences the variable remuneration of top management and is also one of the criteria for the CAA incentive remuneration scheme.

But what really counts is the progress made in the long term. Last September, the Allianz Group announced that it had made it to the top of the insurance company rankings in the Dow Jones Sustainability Index (DJSI) – a non-financial index developed by RobecoSAM in which it has featured for 17 years. 

For information, Crédit Agricole Assurances is also represented in these indices via the CAsa Group, which is listed in NYSE Euronext Vigeo Eiris Eurozone 120 and the Footsie For Good indices, among others.

1. SRI: Socially Responsible Investment 

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