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Environmental risk solutions in China

Can compulsory liability insurance reduce environmental risk?

Environmental pollution

In the past, with China's extraordinary economic growth, some man-made pollution problems appeared in the face of the nation. For example, some private chemical enterprises which only pursued profits did not care about environmental protection and caused some environmental pollution incidents that aroused social concern.

The Chinese Government is alert to this issue and over the past five years has devoted significant energy and resource to ecological conservation. The nation has become more purposeful and active in pursuing green development and there has been a clear shift away from the tendency to neglect ecological and environmental protection. Whilst more needs to be done to resolve China’s water pollution problem, efforts to conserve resources have seen some encouraging progress, for example: the intensity of energy and resource consumption has reduced; major ecological conservation and restoration projects mean forest coverage has increased; and ecological and environmental governance has been significantly strengthened. China has become an important participant and contributor in the global endeavour for ‘ecological civilization’ that ensures harmony between humans and nature.

Case study by Mr Xiaoxuan (Sherwin) Li, FIA

Mr LiEnvironmental risk analysis is a frontier topic in the field of green finance, which is also the core issue of the G20 Green Finance Study Group (GFSG). The quantitative analysis of environmental risk and its pricing strategy are very important problems in the process of building an effective and sustainable green financial system.

The China Society for Finance and Banking is a member of the G20 Green Finance Study Group and it is promoting a ‘greening’ of the financial system by financing for sustainable growth and development. The Insurance Society of China is also focusing on the promotion of sustainable development and green insurance. At the beginning of 2017, these two organisations came together to undertake a quantitative analysis of environmental risk for the finance and insurance industry in China. In the project, the quantitative analysis of environmental risk for the insurance industry was led by the appointed actuary of China Re, Mr.Xiaoxuan (Sherwin) Li, FIA, and his actuarial team.

The project’s initial findings are that the externality of environmental risk is being borne by society, rather than the industries which cause and reap the financial rewards from behaviours that increase environmental risk. In other words the companies that are causing environmental pollution though their businesses practices are profiting because they do not have to internalise these costs themselves – instead the Chinese Government is having to raise revenue to clean up the environment in China. 

In the project, actuaries involved are using actuarial methodologies and catastrophe modelling methodologies to evaluate environmental risk. The ultimate aim is that this will lead to businesses having to internalise the cost of any environmental pollution caused by their operations. The models used by actuaries means they are able to measure an entity’s environmental risk and place a cost on that risk, depending on the potential probabilities and severities of environmental risk caused by the entity. This cost would then be recouped from entities via an insurance premium based on its behaviour related to taking environmental risk. This mechanism ensures that the costs of environmental pollution fall on the entity causing / benefitting from the pollution, rather than the society.

In June 2017, the Ministry of Environmental Protection of China and China Insurance Regulatory Commission released the exposure draft of the administrative measures for compulsory liability insurance of environmental pollution. With this mechanism, China hopes that its society and economy will continue on the path towards healthy and sustainable development.

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Events calendar

  • Asia Conference Webinar Series

    Webinars
    7 September 2020 - 25 September 2020

    Spaces available

    There will be a prestigious line-up of international speakers discussing the insurance and financial industry’s innovation and change in Asia.  The conference will take place throughout September via an online platform. The webinars consist of plenary speaking sessions and a series of workshop sessions including Life, GI, Data Science, Sustainability, Risk Management and Investment.

    This will be the perfect opportunity for you to discover,ask questions and be at the forefront of current and developing actuarial/financial topics and trends in Asia.

     

  • Spaces available

    This free 90 minute webinar is designed to support the IFoA CPD Co-ordinators, and others, involved in supporting our members to achieve their CPD requirements. 

    The programme will include an overview of the new CPD Scheme; specifically sharing with you key messages to support you implement and embrace the new CPD Scheme for our members within your organisation and regional community; how to arrange a reflective practice discussion; and an interactive reflective practice discussion learning exercise.  In addition, delegates will gain information about accessing, and making the most of the IFoA event Toolkits which you can make use of to run your own in-house events and events for regional communities. 

  • Spaces available

    16.00-17.00 GMT+8

    Consumer expectations are changing Insurance. The Royal Commission in Australia, Design Obligations in the UK, the insurtech ecosystem, and digital-first consumers demanding personalised solutions will all revolutionise how insurance looks like in the future.

  • Spaces available

    12.00-13.00 GMT+8

    This presenter / panel workshop hybrid will be anchored by two presentations examining the socioeconomic, medical and technological factors that will have a significant impact on mortality and our pricing over the next 20 years and beyond. It will also discuss whether significant mortality improvement will continue in Asia or whether varying experience of low improvements or deterioration. 

  • Spaces available

    12.00-13.00 GMT+8

    This presentation aims to provides an overview of the reformation of current Chinese regulatory solvency regime, how industry coping with the new normal after pandemic time and how the reformation of the regulation could help the insurance industry gets back on its feet as well as coming back to the “protection” core value for the policyholders. The presentation would include:

  • Spaces available

    16.00-17.00 (GMT+8) | 09.00-10.00 (BST)

    The basic data of China’s 2nd Critical Illness Mortality Table covers 2000+ products in Chinese market, including about 340 million insurance policies and 5.1 million claimants. Presenter will give the audience a general understanding including but not limited to the following contents:

  • Autumn Lecture 2020: Professor Elroy Dimson

    Online webinar
    14 October 2020

    Spaces available

    Many individuals and institutions have a long-term focus, and invest funds for the benefit of future generations. Their strategy should reflect their long horizon. University endowments are one of the oldest classes of institutional investor, and I will present the first study of the management of these endowments over the very long term.

  • GIRO Conference 2020 Webinar Series

    Available to watch globally in November.
    02-13 November 2020
    Spaces available

    This year's GIRO has been re-designed as a virtual conference to offer members and non-members the opportunity to get up to date content from leading experts in the general insurance field via online webinars. All sessions will be recorded and made available to purchase and re-watch post-event on the IFoA's GI Online Learning Resource area.

  • Spaces available

    Cash-flow driven investing is a game-changer for DB pension funds navigating their end-game. Suitable for sponsors who want to reduce risks on their balance sheets. And for trustees, it shifts the focus to providing greater certainty of returns, managing funding level volatility and ensuring they have enough income to pay cash-flow requirements.

  • Spaces available

    The talk will provide an understanding of the priorities and relationships between deficit reduction contributions, in the context of wider scheme funding, and different types of value outflow from the employer based on the working party’s recently published report.