ClimateWise principles report 2008

How does Aviva lead in risk analysis?

Aviva is a member of the United Nations Environment Programme Finance Initiative (UNEPFI). We participate in three work streams: Climate Change, Insurance and Investment. Aviva played a major role in the production of the Insurance Working Group report "Insuring for Sustainability".

The report details why sustainability matters in insurance and why the industry is uniquely positioned to tackle some of the most serious challenges the world is facing including the effects of climate change. It makes clear that embedding environmental, social and governance issues in core processes, products and services enhance long-term company value. Aviva included two practical case studies sharing information on telematics technology and flood resistant home.

Our UK business, Aviva, is driving forward work on flood mapping to accurately identify where flood risks occur in finer detail, which enables us to pinpoint risk more accurately and therefore resulted in a greater number of people gaining access to insurance.

Our analysts are able to model weather events, which can directly or indirectly affect most classes of business, but primarily our Domestic and Commercial Property business. For this business, in most cases, weather perils claims are experienced separately, in order to more accurately set the appropriate level of reserves for past accident months. Based on expected volumes of business, we will also project forward the expected claims experience up to 18 months into the future.

Aviva actively supports more accurate forecasting of weather events through our work with government agencies, including consultation with the Pitt Review's Interim Report and the Statement of Principles work. Aviva continues to meet a range of stakeholders to discuss our views on flood management going forward - this includes the Environment Agency, the Royal Institute of British Architects, and The Association of Drainage Authorities - all of which have a huge interest in this area.

We are able to develop new insurance products with new technology. Our telematics technology for example has been developed to launch the Pay as you Drive™ product. This technology assesses where, when and how far customers drive, which gives them more control, choice and flexibility over premiums. Aviva Canada's Autograph programme also uses telematics technology to assess risk. Customers can directly influence their premiums by receiving credit for their individual behaviour.

Aviva France and Delta Lloyd offer a motor insurance policy for hybrid or dual fuel cars. Aviva France also offers reduced premiums for customers with energy efficient homes. For information on these products and more from around the group please see our 2008 CR report.

How does Aviva inform public policy making?

We have worked closely with the Department for Environment, Food and Rural Affairs (Defra) in their policy development, especially on the issue of flood resilience, where they have used the Norwich Union flood resilient house in Lowestoft, Suffolk, as a prime example of best practice for flood resilient methods.

Aviva has also responded to Defra's consultation on surface water drainage, which is looking at the ways in which the UK can better manage the systems and the land that we have available to ensure that we are best equipped to deal with flooding. Aviva's engagement in this is essential, as we are keen to ensure that flood insurance remains in place as far as possible, which will require a long-term, strategic approach to flood management from Government.

We have responded to the Pitt Review's Interim Report, which is looking at the lessons to be learnt from the Summer 2007 floods. This has enabled us the opportunity to explain both the actions we took to help our policyholders when they needed us most, and also the wider context in which the importance of insurance should not be underestimated.

We have also discussed in our response the wider issues that need to be addressed in order to ensure that flood insurance remains widely available - for example we have highlighted: the long term flood defence expenditure required from Government; where - and how - new developments will be built in the future; and the information relating to flood risk which is currently available to insurers. As climate change brings an increased risk of flooding, Aviva is looking for a commitment from Government that the various issues that this raises will be addressed.

Aviva has responded to the Scottish Government's consultation on "The Future of Flood Risk Management in Scotland", which is looking ahead to the future, aiming to address the increased threat of flooding that climate change brings and how Scotland should be best equipped to deal with this. Again, we will be discussing the policies that we believe need to be developed to ensure the continuation of flood insurance.

Igal Mayer, chief executive, Aviva, gave evidence to the Environment and Rural Affairs Select Committee following the flooding in England and Wales in Summer 2007. During this session, we discussed our response and the service provided to our customers, and the issues we feel need to be addressed to ensure that flood risk is adequately and sufficiently managed.

Aviva spoke at events at all three party conferences, discussing the issue of flood prevention alongside representatives from each political party, the Local Government Association, and the Environment Agency. This gave us the opportunity to engage in an open discussion with key stakeholders, promoting our key messages regarding flood management.

We are feeding into the Statement of Principles review, which is being conducted by the Association of British Insurers (ABI). Four representatives from Norwich Union are meeting with other insurers and government officials on a monthly basis, discussing the issues and aiming to come to an agreement and a revised Statement of Principles by the end of June 2008.

With regard to our response to the Summer 2007 floods, we received approximately 51,000 claims, with an overall approximate cost of £475 million. This represents a huge leap in anything we would normally expect for the time of year. To help deal with this, we implemented our Major Incident Response Plan to help ensure that we continued to deliver a high level of customer service to our policyholders. We visited emergency evacuation centres to provide advice and support to those flooded, and we also deployed a special Norwich Union Claims Bus in those areas most affected by the flooding.

We worked closely with the emergency services and the local authorities to help ensure that our efforts were in co-ordination with their work and response, by keeping them up to date with what we had planned and what we wanted to do. For example, in Hull we purchased 400 mobile and static caravans to provide alternative accommodation where customers wished to stay with their homes, or where there was no alternative accommodation available - this required us to work closely with the local council to ensure that the appropriate planning permission was sourced.

We are continuing to meet a range of stakeholders to discuss our views on flood management going forward - this includes the Environment Agency, the Royal Institute of British Architects, and The Association of Drainage Authorities - all of which have a huge interest in this area.

Aviva Investors, our fund management business in the UK, works on a national and international stage with a number of other investors to ensure a coherent approach to climate change including the Institutional Investors' Group on Climate Change (IIGCC). Their work this year included a letter to investors in America to encourage disclosure of climate risk exposure. For further information please see the IIGCC's publications.

How is Aviva supporting climate awareness amongst our customers?

Part of our ongoing commitment to inform and encourage action on climate change to our stakeholders, can be seen in Norwich Union's 'Prestige' service to corporate property insurance customers. This includes an environmental auditing service, providing energy performance certificates, advice on how to reduce emissions and provision of a full carbon offsetting purchase and verification facility.

As mentioned in our report under Principle 2, Norwich Union have developed a flood resistant home based in Lowestoft to demonstrate available measures to protect homes from flooding and to aid a quick return to a home after it has been flooded. We also provide help and information to our customers who have been affected by flooding.

Aviva UK has developed a Climate Change Champions programme with schools in the York, Norwich and Perth areas to educate children and raise awareness in the local community of energy savings initiatives. This programme was celebrated at the House of Commons with Joan Ruddock MP, Hugh Bailey, Jim Knight MP and Charles Clarke MP on 16 June 2008.

We have a number of different products and services that are adapted to support climate change awareness. For example, Norwich Union has a 'green' ISA, Aviva Canada and Aviva Sigorta promote the Pay As You Drive™ product, Aviva France provides discounts on home insurance for energy efficient initiatives - see our progress on product development in our 2008 CR report.

We are working with our suppliers to increase the proportion of sustainable repairs. For 2008 we are targeting a further 7% above the 2007 rate to be repaired.

In terms of brown and white goods replacement we have implemented a more stringent set of rules to determine what products should be inspected to maximise the repair opportunity. 15% of these goods deemed BER (Beyond Economical Repair) for an insurance claim are given to Remploy, a training charity for disabled people, to work with and generate an income stream. Read more about Remploy.

We are also working with suppliers to improve the repair rates for IT goods. In addition to this we work with an IT repairer to support the local technical college, by offering suitable products that students could work on as part of their studies. Hard drives are removed from all IT equipment that cannot be repaired and then stored securely for an agreed period of time before being wiped clean, drilled and disposed of as per the WEEE directives. The disposal of the rest of the un-repairable IT and brown and white goods is in-line with the WEEE directives.

Our general ongoing work with suppliers to reduce our environmental impact is discussed in ClimateWise principles report 2008 Principle 5.

Our carbon offsetting programmes are based in developing countries to aid development and share expertise of adaptation technologies. For 2007 our programmes are based in India, China and Africa. In India we have funded two bio-energy projects and a solar power project, we support a small scale hydro project in China and a solar power lamp project in Africa. For further information on our offsetting activities please see our 2008 CSR report.

How does Aviva incorporate climate change into our investment strategies?

Aviva holds face to face meetings with investors to discuss the full range of their CR programme which includes a strong focus on our climate change strategy.

Aviva Investors, our UK fund management arm, includes climate change in its sustainability matrix as a way of reviewing the ethical value of companies it may wish to invest in. As a large investor Aviva Investors holds the power to withhold voting at AGMs of companies where it believes sustainability performance could be improved.

Aviva Investors was a founding member of the Carbon Disclosure Project and continues to work with the CDP to develop the breadth of climate change reporting. Aviva responds to the CDP at Group level and in 2007 was awarded 'Best in Class' for climate change disclosure. View our 2007 submission to the CDP.

We can promote more sustainable business practices by increasing the funds under management in our specialist Socially Responsible Investment (SRI) funds. Aviva Investors is a leading SRI fund manager with £1.2 billion SRI funds under management. Aviva Investors actively encourages companies to disclose via the CDP. Out of the 29 companies that they actively engaged with, 15 provided a full answer to the CDP, three provided some information, and one further response was committed but outstanding in 2007. Further to this, Aviva Investors produces literature for investors on the importance of taking climate change into consideration in investment decisions.

Globally, we produce a CR report to communicate our strategy on climate change to customers and wider stakeholders.

Our pension trustees are advised by our investment managers who will take account of a range of risks affecting our portfolio, including climate change. Pension trustees also seek advice from the audit and risk committee who regularly consider risk issues affecting the pension scheme.

The Aviva purchasing and supply policy provides a commitment that CR is given 10% weighting in all new tenders and requires suppliers to sign a Code of Conduct. The Aviva UK Head of Procurement Practice, Policy and Supplier Relationship Management is the chair of the CIPS Financial Services Purchasing Forum Corporate Responsibility group, driving forward change within the financial services industry to become more sustainable.

Our environmental programme focuses on reduction of carbon emissions, water and waste reduction. We have set a global target to reduce our carbon emissions by 5% in existing business for 2008.

All businesses within our four regions are included in our commitment to reduce our environmental impact. Some ways that we do that is to control the emissions of our existing buildings through retrofitting energy efficient devices and implementing low impact design solutions to new buildings; managing recycling of our waste into 14 waste streams in the UK, and trialling water reduction initiatives. We have two new BREEAM standard buildings in construction during 2008/9, in France and the USA.

In 2007, we achieved a 10.8% reduction in carbon emissions within existing business. Our full programme of environmental impact reduction initiatives is reported in our CR report.

We disclose our emissions using the Greenhouse Gas (GHG) Protocol. Our global emissions for 2007 were 130,219 tCO2. Further to this, Aviva reports on environmental impacts and financial implications according to the Accounting for Sustainability Combined Reporting Framework.

For full disclosure of our carbon emissions and other environmental impact areas please see our 2008 CR report.

Employee engagement is an important part of our work to reduce our environmental impact. Environmental awareness in the UK is quite high and this provides results for our ongoing environmental programme. Our Think Global Act Local forum draws together environmental champions to share good practice and encourage further progress.

Around the world, especially in some of our developing businesses, awareness of climate change is somewhat less integrated into everyday life. Employee engagement is a priority here and the work that we have carried out in partnership with FORGE companies (a group of insurers and banks) to produce employee engagement guidance continues to help drive forward work in this area.

Aviva was the first insurer to be carbon neutral in respect of its global emissions. We promote our carbon neutral status and offsetting projects to our employees periodically and have set up a website to encourage our employees to offset personal emissions.

We have a Board CR Committee which is responsible for the CR strategy and policy, and for reviewing the progress of our CR programme, which includes climate change. To see full details of our Board view our 2008 CR report.

This statement is our report on the ClimateWise Principles for 2007.