Environmental insurance risk in ISO 14001 environmental management systems
Malwina Lemkowska, PhDThis research was undertaken as part of the project:
Private insurance and environmental management systems complying with ISO 14001 as tools of environmental risk's management - analysis of relations and was funded by a grant of National Science Centre,
Poland (2016/23/D/HS4/02654)
Agenda
Research context
ISO 14001 introduction
Study description
Results
Conclusions
Environmental effect
Environmental footprintGlobal levelInternational institutions
Macro level
States
Micro level
Insurers
Insuring parties
Insureds
Global levelInternational institutions
Macro level
States
Micro level
Insurers
Insuring parties
Insureds
declarations
recommendations
programmsStates’
environmental
policies
EMS
technologies
quarantees
insurance
…
Integration Synergy
OECD
UN
EU
…
Private insurance and environmental management systems complying with ISO
14001 as tools of environmental risk's management - analysis of relations
Funded by a grant of National Science Centre,
Poland (2016/23/D/HS4/02654).
Integration Synergy
ISO 14001Environmental
insurance
Previous research
•as long as insurance companies were not provided with a harmonised interpretation of ISO 14001 standard, certified systems’ value for insurance companies would be rather limited
Swiss Re
1998
•insurers were not and would not be seriously interested in the difference made in insureds by implementation of EMS, because they were only partly committed to occurrence of environmental damage, as much as they were liable for its restitution
Minoli, Bell
2000s
•Most insurers expressed the intention to incorporate systemic solutions in underwriting process. Until 2006, no principles of such operations had been established.
EPA
2006
•Companies which implemented an ISO 14001 EMS expectedlower insurance premiums, They expierenced however veryseldom discounts being granted by the insurer
Polish studies
2007; 2009
•EMSs identified as an important growth factor of environmentalinsurance
EuropeanCommission; FERMA
(2016 – 2018)
Introduction
Environmental management system ISO 14001:2015
Integracja Synergia
ISO 14001Ubezpieczenia środowiskowe
The main attributes of ISO 14001
Risks and
opportunities
Environmental
aspects
Compliance
obligations
Other issues and
requirements
Context of the
organization
Environmental policy
Environmental
objectives
The main attributes of ISO 14001 EMS
Environmental aspect
Element of an organization’s activities or
products or services that interacts or can
interact with the environment (p. 3.2.2. ISO
14001
Environmental impact
Change to the environment, whether adverse or beneficial, wholly
or partially resulting from organization’s environmental aspects
Significant environmental aspect
One that has or can have one or more
significant environmental impact(s)
The choice criteria of environmental aspects and
significant environmental aspects are individually set by
the organization
The main attributes of ISO 14001 EMS
Risks and
opportunities
Environmental
aspects
Compliance
obligations
Other issues and
requirements
Context of the
organization
Environmental policy
Environmental
objectives
The main attributes of ISO 14001 EMS
The scope of the system
Potenialemergencysituations
Prepare the respond to emergencysituations
Including those that can have an
environmental impact
The organization shall establish, implement and maintain
the process(es) to prepare for and respond to potential
emergency situations
… plan actions to prevent or mitigate adverse
environmental impacts from emergency situations
Results
How to evaluate usefulness of the ISO 14001 EMSs
adopted by the insured or insurance seeker for the
process of providing environmental insurance products?
Integracja Synergia
ISO 14001Ubezpieczenia środowiskowe
Checklist
Indirect
determinants
Determinants of personal integration
(formalne; faktyczne)
Determinants ofdevelopment
Direct
determinants
Determinants of the scope of
environmentalinsurance risk
Determinants of information potential
of management systems
Formal; Actual
CategoryLevel II
CategoryLevel III
Description of indirect determinants
Personal Integration Formal Joint functions of the person responsible for the standardised management system and the scope of insurance cover in the organisation
Actual The person responsible for ISO 14001 knows about the current completed environmental risk insurance contracts
The person responsible for ISO 14001 knows about the past environmental risk insurance contracts
The person responsible for ISO 14001 knows the possible reasons for lack of insurance
The person responsible for ISO 14001 is able to indicate insurance products in the area of insurance risk which have been purchased by the organisation
The person responsible for ISO 14001 knows whether the insurance company enquired about system implementation at the stage of contract completion.
The person responsible for ISO 14001 knows the impact of systemic management on premium level.
The person responsible for ISO 14001 knows the impact of systemic management on the scope of insurance.
Development determinants (taking into consideration the factors of environmental insurance risk in the process of system development)
Organisation analyses insurers’ interests in the process of organisation’s context assessment.
Organisation takes into account the likelihood of compensation payments to the parties interested in the process of
identification thereof.
Organisation takes into account the estimated, probable amount of compensation payments in the process of identification of the parties interested.
In the process of environmental aspects identification, organisation considers the regulations referring to liability toward third parties for environmental damage or other adverse environmental effects resulting from their operations.
In the process of environmental aspects identification, organisation considers the regulations enforcing remedy of environmental damage or other adverse effects on the environment.
In the process of environmental aspects identification, organisation considers – if it has any damage-related experience – the scope of damage done to the environment and other adverse effects on the environment in the past.
In the process of environmental aspects identification, organisation considers the value of compensations payments
to third parties and other claims in the past.
In the process of environmental aspects identification, organisation considers the costs of remedying action with regard to environment elements in the past.
Category Level II Description of direct determinants
Determinants of the scope of environmental insurance risk
Organisation establishes the process(es) for responding to emergency.
In the processes for responding to emergency organisation considers actions indispensable for restoration of the environment to its baseline condition and cleansing the environment afterwards.
Organisation monitors the condition of technical means of prevention.
Organisation monitors the condition of technical means of reducing adverse effects on the environment.
Organisation monitors installation parameters.
Organisation sets environmental goals in areas which are relevant to environmental insurance risk.
Organisation accomplishes the environmental goals mentioned above.
Organisation takes preventive and repressive action.
Subjective assessment of the person responsible for ISO 14001 referring to the impact of the implemented management system on the scope of environmental risk for the organisation.
Determinants if informationpotential of EMSs
Organisation estimates the likelihood of damage occurrence or another adverse effect on the environment.
Organisation estimates the probable maximum cost to be incurred as a result of potential damage done to the
environment.
Organisation monitors environmental aspects.
Organisation holds a ledger of environmental damage within a particular scope.
Results
Where environmental insurance risk is included within
the EMSs in conformity with ISO 14001:2015?
Integracja Synergia
ISO 14001Ubezpieczenia środowiskowe
Time scope: November 2018 – May 2019
First stage: listing the organisations which have
implemented and certified ISO 14001 EMS in Poland
Result: 1612 entities
Second stage: online interview
Results: 183 organisations in the interview, 121
completed the questionnaire correctly
Study description
Ontologicalapproach
Environmentalinsurance
Epistemologicalapproach
EMSs
ISO 14001
Concept of risk
Ontological approach
Six categories of environmental damage/other adverse impact
on the environment, the occurrence of which leads to
materialization of environmental insurance risk:
Pollution of surface water;
Pollution of groundwater;
Pollution of the land;
Damage to the protected species or protected natural
habitats;
Adverse impact resulting from emissions of substances into
the air;
Adverse impact resulting from energy emissions.
Risk – subject-centric
State of the affairs concerning the properties of the
subject itself or object with which the subject remains in
a certain relations.
Possible;
Future;
Unacceptable to the subject;
Epistemological approach
Environmental insurance risk
Organisation'senvironmental
risk
Scope of cover in
environmental insurance
Environmental
insurance risk
a possible component of organisation’s environmental risk
the types of a subject’s environmental risk the financial
implications of which – considering the present insurance
product range – may be transferred onto the insurance
company by entering into an environmental insurance contract
Did the organisations create proper conditions at the
stage of system design in order to include
environmental insurance risk in the environmental
management system compliant with ISO 14001
analysis of needs and expectations of all the parties
interested
the process of identification of environmental
aspects
Process of EMS ISO 14001
development
Approximately 85 % of organisations declared that they
perform a comprehensive or partial analysis of needs
and expectations of all the parties interested
30.6% of the respondents offered such answers with
regard to the insurance sector as the interested party.
10,74% organisations are driven by the criterion of
likelihood of compensation payments to the parties
interested
4,96% organisations are driven by the criterion of
estimated possible amount of compensation paid out to
the parties interested
Analysis of needs and expectations of
all the parties interested
The organizations take into account:
14,05% value of compensation and other benefits paid to third
parties in the past
21,49% costs of performing remedial action with regard to the
elements of the environment incurred in the past
47,94% the scope of the environmental damage or other adverse
impacts caused to the environment in the past
40,5% the regulations referring to liability towards third parties for
environmental damage or other adverse impacts resulting from the
company’s operations
42,15% regulatory obligation to remedy environmental damage and
other adverse impacts on the environment
45,45% the likelihood of causing environmental damage or exerting
adverse impact on the environment in the future
Process of identification of
environmental aspects
To what extent environmental insurance risk was taken into
consideration in already implemented systems
attributes of procedures with respect to responding to emergency
situations;
taking preventive and repressive action with regard to
environmental insurance risk.
monitoring technical means of prevention and repression;
monitoring of installations;
establishing of environmental goals in the area of environmental
insurance risk mitigation
efficiency in the accomplishment of the goals
EMS ISO 14001 structure
Did organisations establish any procedures for responding to
emergencies referring to prospective environmental hazard caused
in six categories of environmental damage/other adverse impact on
the environment
Attributes of procedures with respect to
responding to emergency situations
0 10 20 30 40 50 60 70 80 90 100
pollution of surface water
pollution of groundwater
pollution of the land
damage to protected species or protected naturalhabitats
adverse impact resulting from emissions of substancesinto the air
adverse impact resulting from energy emissions
Lack of procedures
No threat Others
Did organisations include in the procedures for responding to
emergencies the actions to restore the environment to the baseline
conditions and remedy the environmental damage/ other adverse
effect to the environment after a failure?
Attributes of procedures with respect to
responding to emergency situations
Do the organizations take preventive and plan repressive action
with regard to environmental insurance risk?
Taking preventive and repressive action with
regard to environmental insurance risk
Do the organizations monitor different parameters of installations
and technical means of prevention and repression?
Monitoring and maintenance of installations
and technical means of prevention and
repression;
Do the organizations establish the environmental goals in the area
of environmental insurance risk mitigation?
Establishing of environmental goals in the area of
environmental insurance risk mitigation
Conclusions (1) Results
Research difficulties: lack of public list of organisations;
The systems’ implementation process without factors
important for the environmental insurance risk;
Poor environmental insurance risk’s consideration in EMSs;
The concentration on internal operational processes and
utilities (installation, technical means of prevention and
repression etc.) rather than destination of pollution (water,
land, etc.);
The great differentiation of EMSs as a result of ISO 14001
standard’s flexibility;
The great differentiation of EMSs as a result of certification
process’es attributes.
Conclusions (2) Reasons
Low exposure to environmental insurance risk of
organisations participating in the study (risk profile)
Trust in the state of the art technology
Poor environmental and insurance awareness
Reluctance of the public administration to act (NIK
report, August 2019)
Conclusions (3) What to do?
Recommendation for implementation of EMSs ISO
14001 for insurance purposes;
Insurance sector committment to act: special award or
quasi-regulation
Demand side awareness
Insurance obligation
Cooperation between state, insurers, insurance sector
institutions, certifying entities
Conclusions (4) Why to act?
Society – paradigm of sustainable development
Insurers – financial and nonfinancial goals
Insuring party/ insured – premium benefits/scope of
cover
Certifying entities – competitive advantage
„…sustainability is already a key factor for insurers. This includes
sustainable investment strategies, but also sustainable approaches
based on stewardship and engagement to contributing to
sustainability. The increasing number of insurance companies
voluntarily committing to sustainability objectives confirms that a
transition towards sustainability is already taking place.”
Insurance Europe comments on the EC proposal
for a regulation on disclosures for sustainable investments and
sustainability risks. ECO-LTI-18-034. Position Paper, 2018.
Thank you very much for your attention!
Malwina Lemkowska PhD
Department of Insurance
Poznań University of Economics and Business
