A new study has shown more than 90 percent of Bermudian (re)insurers are planning to integrate ESG data into underwriting in the future, The Insurer can reveal, with 45 percent actively reducing exposures to certain lines of business. 

ESG - Bermuda

The report by the Bermuda Business Development Agency (BDA) and Oxbow Partners, set to be released tomorrow as part of the BDA’s Bermuda Climate Risk Summit, has highlighted concerns among respondents about the lack of reliable ESG data for reinsurers, particularly for tracking Scope 2 and Scope 3 emissions.

Respondents suggested a general reticence to use hard exclusions, citing the social implications of withdrawing cover, with a desire to support a transition and work in partnership with policyholders. 

The study found many Bermudian firms are still in the early stages of their ESG journey, with only 32 percent having currently sourced any specific ESG underwriting data, noting a limited understanding at present as to what to do with any data obtained. 

More than 90% of Bermudian (re)insurers plan to integrate ESG into underwriting in the future

However, 92 percent of those that don’t currently factor ESG into underwriting practices said they plan to do so in the future. 

Close to half (47 percent) of respondents have now integrated ESG into their investment strategies and of those that haven’t, 90 percent are planning to do so in the future or are in the process of doing so already. 

Across all respondents, only 14 percent have yet to take any formal action on ESG, with 43 percent of respondents citing ESG as an opportunity and only 19 percent seeing it as a risk. 

Investors and shareholders were cited as one of the main drivers of ESG activity by 86 percent of respondents, with employees (81 percent) also a significant instigator of activity. 

Key stakeholders pushing ESG forward in Bermuda

While the survey respondents widely acknowledged the island was ahead of the US in terms of ESG maturity, 76 percent recognised that the maturity of Bermuda’s regulation is behind that of Europe and as such expect further regulation in the future, including a shift from guidance to mandated action.

Resource was cited as a barrier to progress by 71 percent, with 43 percent citing a lack of reliable ESG data. Several companies also cited concerns around the legal and reputational risks of disclosure. 

The report recommends a series of actions, including documenting current activity, creating an ESG vision and ambition which can then be developed into a strategy and action plan, creating an independent ESG data strategy and improving collaboration and becoming more involved in advocacy. 

The study was based on the responses of 21 Bermudian (re)insurers and ILS funds representing more than $100bn of gross written premium and a combined investment portfolio of more than $550bn.

Primary barriers to accelerating ESG in Bermuda

In an interview as part of the report, Bermuda Monetary Authority CEO Craig Swan said the regulator was “positive but realistic” in its expectations for (re)insurers’ capacity to achieve a successful orderly transition to net zero. 

“We want to preserve the stability of the Bermudian market as it has the potential to significantly contribute to global climate change solutions. We expect Bermuda’s commercial, captive and ILS markets to continue to be key players in the development of new technology and supply chains,” he said. 

He said the BMA’s 2022 business plan was incorporating ESG considerations, particularly on climate change, into its regulatory and supervisory approach. 

“This will include risks, opportunities and innovation. For example, we may need to see changes to risk models due to climate change or a new approach to risks that are harder to quantify such as reputational risk,” he said. 

“We are also providing the insurance sector with comprehensive guidance on the governance aspects of climate change, ensuring that companies consider all climate-related risks.

“The ‘financial stability’ part of our mandate also provides a potentially broader scope to work with the market in the long-term to ensure an orderly transition process.”