Sustainability-Linked Insurance Principles (SLIP): FERMA & SBB
Together with FERMA, SBB Insurance AG has developed the Sustainability-Linked Insurance Principles (SLIP), a new guidelines document designed to strengthen market integrity and transparency, to support the development of credible, consistent, and transparent Sustainability-Linked Insurance (SLI) solutions across the market. Download the SLIPs Guidelines for Voluntary Procedures here
Definition of SLI:
"SLI refers to insurance arrangements in which the contractual terms, pricing mechanisms, and/or other material characteristics of insurance coverage are explicitly contingent upon the insured’s achievement of one or more predefined sustainability performance targets (SPTs). Such targets are quantified and measured through clearly specified key performance indicators (KPIs) and objectively evaluated over a defined insurance period. SLI does not necessarily require the earmarking of insurance proceeds for specific sustainable activities. It is rather designed to incentivizing measurable improvements in sustainability performance at the level of the insured entity or portfolio, enabling its application across sectors and insurance lines."
Robert Eigenheer, Head of Corporate Finance SBB Insurance, and Alexandre Mazaud, Project Lead Sustainability-Linked Insurance at Swiss Federal Railways (SBB) contributed to the document, providing concrete practical examples of SLIs' use.
“The strength of the Sustainability-Linked Insurance Principles lies in their practicality. By guiding users through a clear five-step process from selecting meaningful KPIs to independent verification, they provide a structured yet flexible pathway for embedding sustainability into the insurance ecosystem, while delivering measurable outcomes and greater transparency across the insurance lifecycle. This benefits the entire insurance sector, which will be among the sectors most affected by the negative impacts of climate change.” (Eigenheer)
SLIPs: a 5-step approach for integrating sustainability into underwriting practices (from FERMA's press release)
- Select Key Performance Indicators (KPIs): Identify KPIs material to the insured’s sustainability strategy, business activities, and risk profile, which are measurable, relevant to the insurance coverage, and may cover environmental, social, or governance factors.
- Set Sustainability Performance Targets (SPTs): Define specific, measurable, and time-bound targets linked to the selected KPIs which are ambitious, go beyond business-as-usual, and align with broader sustainability strategies.
- Adapt Insurance Terms and Conditions: Link insurance contract features to sustainability performance. This may include premium adjustments, bonus/malus mechanisms, changes to deductibles, or contributions to resilience initiatives.
- Reporting and Disclosure: Ensure transparent, consistent, and regular (at least annual) disclosure. This should include KPI definitions, methodologies, performance against targets, impacts on insurance terms, and any material changes or exceptional events.
- Verification: Require independent third-party verification of performance against KPIs and SPTs to ensure accuracy, reliability, and overall credibility of the programme.
These provide a comprehensive framework that enhances transparency, promotes consistency, and supports the alignment of underwriting practices with sustainability objectives.