The New York State Department of Financial Services (DFS) has revealed a number of actions to promote diversity, equity and inclusion in the insurance industry.
In a circular letter to all New York-regulated insurers, DFS outlined its expectation that insurers make the diversity of their boards and senior management a business priority and key element of their corporate governance. This includes by fostering a diverse pipeline of future leaders.
“Countless studies have shown that companies with diverse leadership teams are more profitable, more innovative and better at managing risk,” said Superintendent of Financial Services Linda Lacewell.
“As the insurance industry grapples with the overlapping crises of the pandemic, economic uncertainty, racial unrest and climate change, strong boards and executive teams reflecting a diversity of skills, experiences and perspectives is even more critical to ensure that companies remain competitive in the face of evolving risks and opportunities.”
The letter follows informal conversations with insurers, trade groups and diversity experts over the last year, as well as input from the committee of New York State’s Council on Women and Girls formed in 2019 to improve the representation of women in financial services.
DFS noted that people of colour made up around 24 percent of the US insurance industry’s entry-level workforce in 2017, but only 8 percent made it to the C-suite. Similarly, women accounted for 57 percent of the entry-level workforce, but only 18 percent made it to the C-suite and only 1 percent of those C-suite executives were women of colour.
The new action builds on DFS’s existing oversight of the corporate governance of New York-regulated insurers.
The regulator noted that the National Association of Insurance Commissioners adopted its Corporate Governance Annual Disclosure Model Act and Regulation in 2014. Both that model act and a corresponding New York regulation require insurers to disclose whether they have a diversity policy and how it functions.
In its new action DFS advised insurance companies to treat diversity like other strategic priorities for their businesses, including communicating its importance to all stakeholders, explaining how it will be achieved, setting goals and measuring progress toward those goals.
The regulator said a company should strive to have a board and management team that benefit from the broadest diversity of skills, experiences and perspectives possible, including based on a person’s gender, race or ethnicity. Insurers should also focus on their pipeline of future diverse leaders, as well as the diversity of their insurance producers and third-party providers.
DFS will begin including questions relating to an insurer’s diversity-related efforts in its examination process starting in 2022.
The regulator has also determined that the best way to support the industry’s diversity efforts is by collecting and publishing data relating to the diversity of corporate boards and management.
As a first step, DFS will collect data from New York domestic and foreign insurers with more than $100mn in annual New York premiums related to the gender, racial and ethnic composition of their boards and management as of 31 December 2019 and 2020, including information about board tenure and key board and senior management roles.
The data will be collected in the summer of 2021 and published on an aggregate basis in the fall.
The regulator strongly encourages companies to disclose publicly the diversity composition of their boards and management as part of their diversity commitment to their stakeholders.
DFS regulates one of the biggest states for US insurers and has been one of the most proactive states on a number of issues.
Last month it issued cyber guidelines for insurers and warned against the payment of ransomware demands.
It has also been one of the most active US regulators on ESG issues, last September issuing a circular letter calling on the industry to manage the financial risks from climate change. DFS said it expects all New York insurers to start integrating the consideration of the financial risks from climate change into their governance frameworks, risk management processes, and business strategies.