April 2022 | The ICISA INSIDER
| Insights
Members’ thoughts on Surety in 2022 By Awang Sulistyo
More countries are expected to lift their COVID-19 restrictions sometime soon as we hopefully move from a pandemic to endemic coronavirus situation. At the same time, businesses are trying their best to make up for losses during periods of lockdown, and people are rushing to enthusiastically enjoy their freedom. In some countries, such as the Netherlands, people are no longer obliged to wear a mask in public places and public transportation. With that in mind – and looking toward the future – no challenge in the 21st century seems more urgent than that of sustainability. This challenge has already seen governments, industries, civil society and individuals mobilised to respond. Although more is needed to address growing concerns. Sustainability has grown as a key focus of our industry and in ICISA. Following on from a first study of ICISA member attitudes and actions on sustainability in 2021, ICISA repeated this survey with surety members in advance of the recent ICISA Surety Week. The level of interest and responses received to this survey is itself telling of the growing importance of sustainability to our members and the wider surety sector. The questions in the survey focused on operational, regulatory and social responsibility aspects of sustainability for insurers and reinsurers in the surety market. Respondents to the survey included companies from Europe, Latin America, North America, Asia, the Middle East/North Africa, and Africa. Sustainability is a global problem and requires global responses – this is well demonstrated in the diversity of the responses we received. As the COVID-19 pandemic impacted our industry in many ways, ICISA wanted to find out how ICISA members are adapting to the current situation. Apart from looking at the sustainability activities of members, the survey also looked at other aspect of the industry to assess the general condition of markets at this stage in the COVID-19 pandemic. The struggle out of the pandemic is clear for the global economy with 60% of respondents expecting 2022 to be a challenging |
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year for the surety business due to the impact of the surging inflation and supply chain interruptions. At the end of 2020, Ernst & Young LLP (EY US) conducted a survey to see the impact of COVID-19 on the supply chain, and it shows that ”the pandemic had substantial negative effects on supply chains” Naturally, this will have a deeper effect on projects and other activities for which bonding is offered, but overall member seem prepared for the challenge. Looking at the impact of the COVID-19 pandemic more broadly, 52% of the respondents indicate that they expect to see more claims in the 12 months as state support will be lifted. Getting the global economy going again is a chance for governments and investors to emphasize sustainable developments and growth. And doing so now is seen as essential. A survey done in 2020 by Research Insights shows that sustainability has reached a tipping point in the public conscience, with 8 out of 10 customers indicating that sustainability is important to them. This shows that sustainability become now an embedded part of society and people are more attracted to responsible companies. ICISA members have different means of demonstrating their approaches to sustainability in this regard. While some have created specific products for this purpose, the majority of respondents are not marketing products as “sustainable”, “green”, or related concepts. The challenge in surety business is that a more sustainable risk is not necessarily a better credit risk. Comparing the change in views since our previous survey, back in 2021, ICISA members have taken major steps to address sustainability in their underwriting strategies and processes, with the majority of members continuing to make progress towards adopting specific policies on sustainability. In addition, the majority of the respondents also maintain targeted investment strategies related to sustainability – ensuring that both sides of the balance sheet are demonstrating sustainable practices.
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