Interview with Marc Hengen, Managing Director of the Luxembourg association of insurance and reinsurance companies in Luxembourg (ACA), on the impact of SFDR rules and the ESG changes it has brought to the sector.
Please introduce the ACA in a few words
ACA is the professional association that brings together and represents life, non-life and reinsurance companies, established in Luxembourg since 1956. ACA’s mission is to protect and develop professional interests, to study issues of interest to (re)insurers and to improve the services offered to the public. ACA defends the professional interests of its 151 members and organises public relations activities to promote the Luxembourg insurance and reinsurance sector. In short, ACA is the voice of Luxembourg (re)insurance.
While insurers will face increased compliance costs, we expect huge demand for ESG products.
What impacts are ESG standards having on the insurance sector?
Environmental, social and governance (ESG) criteria are driven by the Paris Agreement on climate change and subsequent European frameworks on sustainable finance, including the European Green Deal. There are 3 key frameworks underpinning ESG standards. First, the Sustainability Disclosure Regulation, the so-called SFDR, which came into force on 10 March 2021, establishes requirements for financial sector actors to disclose ESG-related risks to clients at product and entity level. Second, the proposed directive on Corporate Sustainability Reporting has recently started the legislative decision-making process. Once adopted, it will set out the reporting requirements for companies on sustainability risks and climate change impacts. Third, the taxonomy regulation is based on a scientific criterion and establishes a common classification system to which the two aforementioned frameworks must be aligned.
While insurers will undoubtedly face increased costs for regulatory compliance, we expect huge demand for ESG products. This will stimulate innovation in our sector and give local insurers the opportunity to take advantage of Luxembourg’s position as a financial centre for green finance.
How is ACA supporting its members in this ESG transformation?
ACA works with its members proactively to provide a platform for exchanging views on best practice implementation. We also engage with the regulator, the CAA, and other bodies to systematically address industry issues and points requiring clarification.
At the same time, we monitor new regulatory developments and identify key industry issues in order to put forward the views of Luxembourg (re)insurers. Through these cumulative efforts, ACA does its best to ensure that the Luxembourg (re)insurance sector is kept abreast of key developments and their impacts.