Enel Insurance has been a leading light in how captives can serve a real purpose improving the sustainability practices of an organisation. Enel was the first captive to sign up to the United Nations’ Principles for Sustainable Insurance, but they’re not stopping there, as Gabriele Frea, chairman of the supervisory board at Enel Insurance, explained in this interview with Captive Review.

Captive Review (CR): Can you explain your job role within Enel Insurance?

Gabriele Frea (GF): Since 2011 I have been the head of the insurance and risk financing department at Enel Group, whose scope of responsibility covers the entire group across its 30 countries of presence and its four global business lines – from power generation to distribution and sales. Since then, and in light of the strong expansion of the group, I had to organise the activities and structure the units and processes both at central and local level.

Out of these responsibilities, the most important is probably the chairmanship of the supervisory board of Enel Insurance NV, the group’s captive insurance/reinsurance company based in the Netherlands, which represents a bright example of an organisation aimed at optimising the risk financing strategies for all the entities of the Enel Group.

In this position, I operate as a link between the company and the group, making sure that all the philosophies and strategies of the latter are properly transfused – with all the due distinctions consequential to the different roles – to the former. In other words, I am called to make sure that the captive operates in all aspects in a manner consistent with the group strategies, balancing the formal contrapositions on one side and creating value for the group on the other side.

CR: What will be the greatest challenge to captive owners in 2023?

GF: There are always more and more factors influencing the behaviours and decisions of captive owners, from the macroeconomic situation and the growing inflation to the energy crisis and the increasing political risks and uncertainties. The request of achieving immediate profits itself seems not to support the investments in tools for risk management, which, by their nature, are more oriented to medium or long term. I truly believe that the main challenge for captive owners will be to keep the ship steady without reacting with panic to possible losses in the short term, since – in the presence obviously of a fit risk management policy – the positive results will have to be measured in the medium term, especially in a framework made of new threats and risks. This could then be more easily achieved through an increasing integration of risk managers with the business units.

CR: How can captives drive a company’s sustainability?

GF: Assuming that the primary purpose of a captive is to reduce the company’s total cost of risk, sustainability should be integrated to enhance and boost this purpose. Captives can represent the right tool to drive the sustainability. This can be done through openness to innovation and the safe environment of captives, where they can experiment with low-risk ESG solutions, which are the perfect humus to boost sustainability solutions within the insurance arena.

CR: What moves has Enel Insurance taken to support group sustainability measures?

GF: Being the insurance captive of Enel SpA is, in terms of sustainability, both an advantage – given the company’s track record in the sustainability arena – and a great responsibility, as it is paramount to not disappoint the high expectations. Enel Group’s sustainability drives the strategy and the captive strives to find tailored applications of this strategy in its business. Success in this complicated task requires a mix of creativity, a deep knowledge of sustainability (and of course insurance) and ESG trends, and a structured team in continuous dialogue with the parent company and with an eye to the whole set of stakeholders. From a practical standpoint, we have created a profit-sharing mechanism that is triggered by the fulfilment of certain sustainable development goals by the insureds on the property damage line of risk, which operates as an incentive to adopt sustainable behaviours. As a matter of fact, the policy clauses introduce a reduction of the insurance premiums (ex-post) for the most sustainable and virtuous entities of the group.

CR: Can you explain in greater detail what the United Nations’ principles for sustainable insurance is and why it’s important?

GF: Developed with a forward-looking attitude by the UN Environment Programme’s Finance Initiative, the principles for sustainable insurance were launched at the 2012 UN Conference on Sustainable Development (Rio+20) with the endorsement of the UN Secretary-General and the insurance industry CEOs. The principles for sustainable insurance have led to the largest and highest collaborative initiative between the UN and the insurance industry, designing a framework for the whole industry, boosting business practices with strong and impacting results on ESG initiatives. The sector has benefited from this, especially in a tough period like the one we are facing, because ESG practices are the most mitigating in terms of risks, thus assuring the investors (and all the stakeholders) like no other strategy could.

CR: How can ESG initiatives work as part of a wider captive underwriting strategy?

GF: If we consider the insurance market as a reliable barometer of the global situation, not ‘just’ and ‘simply’ in terms of economic storms, we have faced – already before the beginning of the world pandemic – a hardening of the negotiations during the underwriting renewal period. This is the picture, and we are the actors of such market, so we are also supposed to develop strategies aimed at improving the arena we live in. ESG is one of the clues in order to determine, build and consolidate an accountable stronger reliability that, within an insurance framework, is immediately translated into a risk mitigation system. If before the principles for sustainable insurance there was a missing link between sustainability and insurance, now the road is paved. Enel Insurance has a portfolio of ESG initiatives in place that are already a tangible risk transfer and mitigation solution. To quote the principles for sustainable insurance, we want to embed ESG in our underwriting strategy through a voluntary commitment that supports the transition to economies that are low-emission, resource-efficient and socially inclusive, as well as climate- and disaster-resilient.

CR: Why should captive owners be motivated to use their captive for sustainability purposes and sign up to initiatives like the principles for sustainable insurance?

GF: The first reason is that ESG is a strong risk mitigation tool that is crucial to our business. Secondly, but not less importantly, is to join a virtuous circle of high-level professionals. The principles for sustainable insurance represent the most engaging, reliable step and commitment toward a leap of quality for the whole industry and to be part of it can make the difference. Prevention, awareness, compliance, detection, investigation and resolution are the pillars of a spirit that can make the environment (in a broader sense) we live in, a better place.