ARWC Chair Speaks on ASEAN Green Energy Insurance Pool at the Indonesia Sustainability Forum 2023

On the second day of the Indonesia Sustainability Forum, ASEAN Reinsurance Working Committee (ARWC) Chair Delil Khairat, was one of the panel speakers on Green Business Opportunities in Indonesia, moderated by Mr. Marko Lackovic, Managing Director & Partner of BCG Singapore on 8 September 2023 at Park Hyatt Hotel Jakarta.

Chair Delil explained the role of insurers in promoting sustainability and hastening the transition to renewable/cleaner energy. There is a transition risk that has to do with the effort in transitioning from brown to green economy. This will involve a lot of investments with such a high uncertainty that would make costs too high and therefore unaffordable for the economy. So, this is where the insurance industry comes into the scene.

Insurers will take over some of the risks so that the investment in green businesses become more affordable for the investors, financiers, and entrepreneurs.

Although it won’t be easy for insurers because they are faced with challengers. He said that there two reasons that made Green Energy such a high risk to the insurance industry: 1) there is lack of past data which are usually used by actuaries to predict the risk; and 2) there is lack of understanding of the risk itself since green energy/renewable energy is an innovation with a new technology that not many people know about just yet.

Insurers, he said, are happy to support the global sustainability agenda, but that the insurance industry must be sustainable on its own. Otherwise, everything will become unsustainable. Risks have to be shared or transferred and businesses also need to bear some of these risks.

To make green businesses, a high-risk industry, affordable, the ASEAN reinsurers, through the ARWC, need to pool their expertise and financial capability to deal with these challengers. The ARWC, chaired by Indonesia Re for the period of 2023-2024 (Malaysia Re, Chair 2021-2022 introduced this idea in 2021) of the ASEAN Insurance Council (AIC) is collaborating among its members to pool their resources.

Chair Delil also took the opportunity to invite Dr. Ridha Wirakusumah, CEO of the Indonesian Investment Authority, and private businesses to invest in the insurance industry in support to the hastening shift from the brown to green economy.

Collaboration is the solution!