As one of the "five major articles" mentioned at last year's Central Financial Work Conference, green finance has seen rapid development in the insurance industry in the past two years. Whether it is green insurance on the liability side or green investment on the asset side, the participation of insurance companies has been continuously increasing.

Based on the 2023 annual reports and sustainable development reports of the five major listed insurance companies on the A-share market, First Financial Daily reporters have found that they provided a total green insurance coverage of over 230 trillion yuan in 2023 on the liability side, and the total green investment on the asset side was 906.664 billion yuan, with many listed insurance companies achieving double-digit year-on-year growth in the scale of green finance.

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"In fact, whether it is due to the strengthening of sustainable development concepts or the business needs of the insurance industry itself, green insurance and green investment are directions of interest to insurance companies, especially large insurance companies. There have been many innovations in this field in the past two years. However, overall, insurance companies are still in a relatively early stage of development in green finance, and there is room for further improvement in both the perfection of relevant rules and the pricing and risk of green insurance," said a senior executive of a property insurance company to First Financial Daily reporters.

Insurance companies are focusing on green finance. The development of green finance by insurance institutions includes not only providing green insurance products and services but also directly investing in green projects with insurance funds.

All five A-share listed insurance companies have disclosed their green insurance and green investment data in their 2023 sustainable development reports or ESG reports.

According to these data, First Financial Daily found that the total green insurance coverage of the five A-share listed insurance companies was 235.09 trillion yuan, and the scale of green investment was 906.664 billion yuan.

Green insurance refers to the collective term for the insurance industry to provide risk protection and financial support in aspects such as environmental resource protection and social governance, green industry operation, and green living consumption. Gong Minghua, Deputy Secretary of the Party Committee and Vice President of the China Insurance Society, wrote in an article that the narrow sense of green insurance specifically refers to environmental pollution liability insurance, while the broad sense of green insurance also includes insurance products that provide risk protection for green energy, green buildings, catastrophes, and green technology fields.

Looking at the definition range of green insurance, property insurance companies are the "main force" in the insurance industry in terms of green insurance. The green insurance coverage of the three listed property insurance companies' groups in 2023 was all within the range of ten trillion to one hundred trillion yuan, and the growth momentum was strong. China People's Insurance showed that its green insurance risk protection in 2023 was 755 billion yuan, a year-on-year increase of 20.4%; Ping An Insurance disclosed the green insurance premium income, which reached 37.3 billion yuan in 2023, a nearly 49% increase from the previous year. Xinhua Insurance and China Life, as two pure life insurance companies, both provided green insurance coverage at the level of one hundred billion yuan.

However, the investment scale of the two life insurance companies on the asset side is not inferior. Data shows that as of December 31, 2023, the green investment scale of China Life reached 462.788 billion yuan; Xinhua Insurance's green investment scale in 2023 was 17.408 billion yuan. The investments of China Pacific, Ping An, and China People's Insurance in 2023 were also all at the scale of about one hundred billion yuan. First Financial Daily reporters calculated that except for Xinhua Insurance not disclosing the green investment figures in the 2022 report, the total green investment scale of the other four listed insurance companies in 2023 increased by about 18% compared to 2022.In fact, the entire insurance industry is very attentive to the development of green finance. According to data from the China Insurance Industry Association, in 2022, the number of green insurance products in the insurance industry exceeded 3,600, the scale of green bonds exceeded 500 billion yuan, 69 institutions established green finance management mechanisms and working groups, and 9 institutions joined the Sustainable Insurance or Principles for Responsible Investment. By the end of June 2023, the green insurance premium income for half a year reached 115.9 billion yuan; the balance of insurance funds invested in industries related to green development was 1.67 trillion yuan, a year-on-year increase of 36%.

At the same time, in the field of green finance, the insurance industry has seen continuous innovation in the past two years.

At a recent press briefing hosted by the Shanghai Insurance Industry Association and the Shanghai Insurance Society, a batch of innovative cases was announced. For example, as a financial unit directly under the State Grid, the Shanghai branch of Yingda Property Insurance has created a "insurance + technology" operation model, and has innovatively developed a distributed photovoltaic power generation loss compensation insurance. So far, it has provided a total risk protection of 14.67 million yuan for new energy enterprises; another example is that on the operation side, MetLife has launched a brand new "Carbon Cycle Green" points area, encouraging customers to actively use electronic services, reduce their own carbon footprint, and integrate the concept of green office into the workplace. At the same time, the person in charge of the Shanghai Insurance Industry Association said that according to incomplete statistics, the Shanghai vehicle insurance electronic insurance innovation function that was fully launched on December 1, 2021, reduces carbon dioxide emissions by about more than 1,000 tons per year.

The regulatory guidance and standard system for green finance are also being intensively constructed. In June 2022, the former China Banking and Insurance Regulatory Commission issued the "Green Finance Guidelines for the Banking and Insurance Industry", and in November of the same year, it issued the "Notice on the Green Insurance Business Statistical System". In September last year, the China Insurance Industry Association issued the world's first industry self-discipline standard "Green Insurance Classification Guidelines (2023 Edition)" that comprehensively covers green insurance products, green investment of insurance funds, and green operation of insurance companies. At the end of last year, the Property Insurance Supervision Department of the State Financial Regulatory Administration issued the "Guiding Opinions on Promoting the High-quality Development of Green Insurance (Draft for Comments)" to insurance companies and insurance industry associations, proposing requirements for key tasks, capacity support, and work guarantees for the development of green insurance on the liability and investment ends.

Why do insurance companies favor green finance?

Industry insiders believe that the reason why insurance companies favor green finance is not only due to the gradual deepening of the concept of sustainable development and compliance with national policies, but also determined by the external factors of the industry environment and the internal factors of company operations.

In terms of external factors, in recent years, the frequency of extreme weather events has significantly increased, and dealing with climate change has gradually become a realistic and urgent task. According to statistics from the Ministry of Emergency Management of China, natural disasters in 2023 caused 95.444 million people to suffer to varying degrees, with direct economic losses of 345.45 billion yuan.

Industry insiders say that as professional risk managers, insurance companies play an important role in dealing with climate change. By leveraging the professional advantages of the liability and asset ends, they provide comprehensive services for climate risk protection and risk reduction for society, support the green innovation and transformation and upgrading of the real economy, and can fully reflect the role of the economy as a "shock absorber" and society as a "stabilizer".

In terms of internal factors, frequent major disasters, increased economic losses, increased environmental litigation, and high incidence of diseases have also increased the claims costs of insurance companies, challenging their underwriting and pricing capabilities. Therefore, the insurance industry, based on its own sustainable development considerations, actively seeks obtainable and affordable solutions, thus forming a win-win effect for its own operations and society, which is also the internal driving force for insurance companies to actively develop green finance.

At the same time, from the asset end, Gong Minghua believes that insurance funds have the characteristics of long duration and stability, which are compatible with the long development cycle of the green industry. The main investment is in the construction of new energy development, fossil energy transformation, green low-carbon renovation of old buildings, and energy-saving and emission reduction projects of high-carbon enterprises.These Shortcomings Still Need to be Addressed

Although there has been a widespread consensus in China's insurance industry on the importance of green finance in recent years, and significant achievements have been made, industry insiders generally believe that the development of green finance in the insurance industry is still in a relatively early stage. There is a need for further improvement in areas such as supporting regulations, product pricing, underwriting, and risk control.

Gong Minghua stated that there are six major factors constraining the development of green finance in China's banking and insurance institutions: First, there is a lack of higher-level laws in the field of green finance in China, and the standards for green finance are not unified, leading to different identification results from different institutions and a lack of comparability between different projects; Second, China currently lacks a scientific and unified assessment standard and quantitative indicator system for corporate sustainable development information disclosure, and there is an urgent need to establish a third-party assessment mechanism; Third, there is a clear lack of capacity in climate and environmental risk management, and the assessment models and methods need to be improved. The identification and quantification of risks in green insurance are difficult, the determination of responsibility is challenging, and the payout ratio remains high; Fourth, the incentive and restraint mechanisms and risk compensation mechanisms are still not perfect, and the enthusiasm of small and medium-sized banking and insurance institutions for developing green finance is not high, with few small and medium-sized insurance institutions involved in the field of green insurance; Fifth, there are fewer types of green financial products, and the phenomenon of homogenization is quite serious. Sixth, there is an urgent need to strengthen the training of professional talent in green finance. In terms of green insurance, insurance institutions are in urgent need of a large number of compound professional talents in product design, pre-risk assessment, risk hidden danger investigation, and post-loss amount calculation.

In response, Gong Minghua suggested that efforts should be made to promote the legislation of green finance; it is possible to draw on the experience of developed countries in the field of sustainable development information disclosure to establish a sustainable development information disclosure system for China's financial institutions and enterprises, unify disclosure standards, and standardize the content and form of information disclosure; establish a green finance information sharing platform to improve the monitoring and handling capabilities of "greenwashing" and other undesirable behaviors; use a variety of methods such as fiscal interest subsidies, tax reductions, policy guarantees, and market access to share and alleviate the risks that may arise from the development of green finance activities by banking and insurance institutions; increase the breadth and depth of green insurance coverage, establish a mechanism for linking enterprise carbon emission levels with insurance pricing, and implement differentiated insurance rates; use technical means to carry out risk assessment of insured enterprises, screening of potential risk factors, and post-damage identification; and build a compound talent team in the field of green finance.

Some industry scholars also said that the risk of green insurance is relatively large, so insurance companies that underwrite green insurance should establish a specialized green insurance risk assessment team during their operation; in addition, China has a vast territory, and the economic development status and regional factors vary greatly, so it is necessary to pay attention to adapting measures to local conditions when implementing the green insurance system; and it is possible to try to establish a special fund for green insurance jointly funded by the government and insurance companies, which can be used for compensation after major pollution accidents occur.