Key developments
The International Association of Insurance Supervisors (IAIS) published a draft application paper on 14 March 2024, on supervising diversity, equity, and inclusion (DEI) in the insurance sector. The draft application paper follows on from the IAIS's 2022 stocktake report on DEI in the insurance sector, which was a first step to inform further work to promote DEI in insurers' governance and conduct of business.
The IAIS explains what's meant by DEI and why it's relevant in the context of an insurer's corporate governance, risk management and corporate culture. It highlights at a high level some of the risks that may arise in an insurer due to a lack of DEI. Such risks include safety and soundness risk, misconduct risk, reputational risk, talent risk, and legal and regulatory risk.
IAIS acknowledges that local circumstances, particularly the legal, cultural, and historical context, will influence how DEI is considered, and the actions taken by supervisors and insurers themselves, to enhance DEI within the sector. It advises that the application paper should therefore be read with this context in mind.
What should happen now?
The draft application paper explains relevant matters for supervisors which are equally important for insurers. It highlights areas that supervisors should look out for and provides a non-exhaustive list of possible warning signs that an insurer might need to enhance its DEI efforts. These can be "lack of challenge in board discussions, resistance to change, and longstanding compliance breaches." It also covers warning signs that highlight shortcomings or problems with the embedding of DEI, such as disparaging or dismissive attitudes to promoting DEI, limited or stagnant diversity metrics, poor internal communications on DEI, and DEI-washing.
Potential steps that a supervisor could take, on either an industry-wide or insurer-specific basis, ranges from using soft powers (such as speeches and Dear CEO letters) to more formal interventions (such as the introduction of supervisory expectations, standards, rules or similar). The paper provides a non-exhaustive list of positive actions that's being taken by some insurers to promote DEI internally such as staff training and education on it at all levels and feedback from staff surveys (covering topics such as culture, behaviours, freedom to contribute and remedial action to address issues).
