PSI: Principles for Sustainable Insurance

What It Is

The Principles for Sustainable Insurance (PSI) is a global sustainability framework launched by the United Nations Environment Programme Finance Initiative (UNEP FI) in 2012. PSI provides a framework for the insurance industry to integrate environmental, social, and governance factors into all aspects of their business — underwriting, investment, risk management, and claims.

The framework consists of four principles that guide insurers toward more sustainable practices, supported by a growing body of implementation guidance, working groups, and collaborative initiatives. PSI recognizes the insurance industry's unique dual role: as risk managers (underwriting) and as institutional investors (managing premium income), both of which have significant influence on environmental and social outcomes.

Who Uses It

• More than 170 signatories — insurers, reinsurers, and other insurance organizations — plus 112 supporting institutions, close to 300 members in all, according to UNEP FI
• Insurance regulators — several supervisors, including the California Department of Insurance and Brazil's SUSEP, are PSI supporting institutions
• Insurance industry associations — many national associations have endorsed PSI
• Institutional investors assessing insurer ESG performance

Key Requirements

Principle 1: Decision-Making — Embed ESG issues relevant to the insurance business in decision-making across underwriting, product development, claims management, sales and marketing, and investment management.

Principle 2: Clients and Business Partners — Work with clients and business partners to raise awareness of ESG issues, manage risk, and develop solutions. This includes engaging commercial clients on their ESG performance and developing products that incentivize sustainable behavior.

Principle 3: Governments, Regulators, and Stakeholders — Work with governments, regulators, and other key stakeholders to promote widespread action on ESG issues. This includes participating in public policy dialogue and contributing to risk understanding.

Principle 4: Accountability and Transparency — Demonstrate accountability and transparency in regularly disclosing publicly progress in implementing the Principles. Signatories must disclose their progress publicly each year, and the PSI Board can delist those that don't meet signatory requirements.

How to Implement

Phase 1: Commitment and Governance (1-2 months) Senior leadership endorsement and board-level commitment. Designate PSI implementation leads. Assess current ESG integration across business lines.

Phase 2: Underwriting Integration (3-6 months) Develop ESG screening criteria for underwriting decisions. Integrate climate risk data into catastrophe modeling and pricing. Develop products that incentivize climate resilience and sustainable practices. Assess portfolio exposure to climate-sensitive sectors.

Phase 3: Investment Integration (2-4 months) Align investment management with PRI principles (many insurers are dual signatories). Assess climate risk in investment portfolios. Set investment exclusions or engagement strategies for high-risk sectors.

Phase 4: Stakeholder Engagement and Reporting (ongoing) Engage commercial clients on climate resilience and adaptation. Participate in regulatory and industry initiatives. Publish annual PSI progress report.

Relationship to Other Frameworks

TCFD: PSI signatories are encouraged to implement TCFD-aligned climate risk disclosure, and UNEP FI has developed insurer-specific TCFD guidance. The TCFD disbanded in 2023, and the ISSB's IFRS S2 now carries its recommendations.

PRI: Many insurance companies are both PSI and PRI signatories — PSI covering the underwriting side, PRI covering the investment side.

Equator Principles: For insurers providing project finance guarantees, EP requirements complement PSI's underwriting principles.

Net-Zero Insurance Alliance: The NZIA, convened by UNEP FI in 2021 on PSI foundations, sought to align insurance underwriting with Paris Agreement goals. It was discontinued in April 2024 and replaced by UNEP's Forum for Insurance Transition to Net Zero (FIT), which works on insurance metrics, voluntary target frameworks, and transition plans for insurers.

Why It Matters

Insurance is the industry most directly exposed to climate change — rising insured losses from extreme weather, shifting risk patterns, and potential for cascading market disruption. PSI provides the framework for insurers to manage this existential risk while using their market influence to incentivize climate resilience.

The insurance industry's underwriting decisions shape economic behavior — if insurers price climate risk accurately and reward resilience, they create powerful market incentives for adaptation and emission reduction. If they don't, they face escalating losses and potential solvency challenges.