Sustainability risk management

Dealing professionally with risks is part of our daily business. By integrating sustainability risks into our risk landscape, we aim to meet our own expectations as well as those of our external stakeholders.

Our approach

We manage sustainability risks as an integral part of our existing risk management framework. Climate-related risks are treated as a subset of broader nature-related financial risks and are considered as risk drivers across our established risk categories, including underwriting, market, credit, liquidity, operational, compliance, legal and reputational risks. In accordance with the European Regulation on sustainability-related disclosure requirements in the financial services sector (Disclosure Regulation), sustainability factors are considered both from the perspective of sustainability risks and from the perspective of potential adverse effects on the environment and society. At the same time, we supplement these risk and impact perspectives with an examination of sustainability opportunities.

We define the principles of sustainability risk management in our integrated risk management (IRM) approach and sustainability risk framework.

Integrated sustainability risk management

Risk management process

Our risk management process covers all activities aimed at the systematic handling of risk by the company. Key elements of this process include the identification and analysis of risks, implementation of risk management measures, monitoring of the effectiveness and appropriateness of these measures, as well as reporting and communication.

Sustainability risks are events or situations occurring in the environmental, social and governance arenas that have – or could have – negative implications for the value of an asset or liability, or that affect our reputation and could therefore be damaging to our objectives. Within our risk landscape, sustainability risks are not considered a new and separate risk category but as a driver of existing risk categories. Our sustainability risk framework sets out our management concept for sustainability factors and risks in detail.

Potential sustainability risks in the operating business are identified in the course of due diligence checks on transactions, for example. They are then forwarded for assessment and managed accordingly. We maintain a list of restricted countries, which is continuously updated. This contains a series of countries in which business activities are either prohibited or where additional due diligence is required prior to concluding business transactions.

Dealing with climate change risks

We are aware of the challenges of climate change and the associated climate change risks. Climate change risks can be divided into transition risks and physical climate risks. Transition risks arise due to possible negative consequences of the transition to a low-carbon economy. Physical climate change risks include risks due to an increase in weather-related damage and natural disasters, which can be caused by an increase in the frequency and intensity of heat extremes, sea heat waves, heavy rainfall, droughts and tropical cyclones.

The management of climate change risks is also integrated into our risk management approach in a holistic manner. On the investment side, we are particularly aware of possible transition risks. For example, we assume that investments in companies with a high exposure to fossil fuels are also exposed to higher transition risks. We examine the greenhouse gas intensity of our investments and subject them to appropriate analyses.

In the insurance business, our focus is on the physical risks for our non-life insurance business. The described increase in natural catastrophes and weather-related losses could have a long-term impact on the underwriting risks in our non-life insurance portfolio. As such, they are analysed and modelled in detail by our risk management and underwriting teams. We consider the risks of climate change using internal stochastic risk modelling, scenario techniques and second opinions from third parties. Various of our non-life insurance products therefore have tariffs that take forward-looking parameters into account. Furthermore, many reinsurers we work with model their contracts using geophysical simulation software (RMS, Verisk, etc.), which means that forward-looking scenarios are incorporated into our reinsurance positions.

Management of harmful sustainability impacts

In our capacity as a financial market participant under the Sustainable Finance Disclosure Regulation (SFDR), we consider the principal adverse impacts of our investment decisions on sustainability factors.

The management of adverse sustainability impacts is also linked to the management of sustainability risks. In accordance with the governance and reporting principle of "double materiality", internal decision-making processes take into account both the perspective of financial risks and the external impact on environmental, social and governance matters. We describe the process for this in our Sustainability Risk Framework and in our statement on Principal Adverse Impacts (PAIs).

Sustainability report of Helvetia Group

More in-depth information on sustainability at Helvetia can be found in our latest sustainability report.