The Insurer TV: Large carriers set to lead ESG integration into underwriting decisions
Increasing scrutiny of insurer attitudes towards environmental, social and governance (ESG) factors means carriers are now expected to address these concerns within underwriting as well as investment decisions.
As AM Best’s senior managing director and chief rating officer, Stefan Holzberger, points out in the latest edition of The Insurer TV’s analysis programme, Prospective, this new way of thinking has taken some time to embed within organisations.
A survey by the rating agency found only 14 percent of respondents actively consider ESG factors in their underwriting decisions.
“We feel it is larger organisations, more sensitive to regulatory and stakeholder responses around ESG, who will increasingly utilise ESG in underwriting decisions,” Holzberger said.
His comments were borne out by yesterday’s announcement from Aviva that it was working with other interested insurers and civil society partners to develop the methodology for net zero underwriting, with more details to be announced in the coming months.
Ian Branagan, executive vice president and group chief risk officer at RenaissanceRe, said a critical role for carriers to play was to address the problems society faces.
“We prioritise our activities where we believe we can apply our core business strengths to addressing those problems,” he said.
RenaissanceRe is one of several companies to unveil a new ESG framework in recent months as major firms within the sector address their commitments.
“We view the framework as a means of framing the activities we deliberately and actively try to engage in, and shift the consideration of ESG from an investor term and an externally pressurized term to one where it is an idea, concept or framework that resonates with who we want to be as a company, and who our employees want to work for, our investors want to invest in and our clients want to trade with,” he said.
From a broker perspective, Charlie Langdale, managing director at Howden, said it was also important to help clients on the energy transition process.
“It is not just about not insuring things,” he said. “If we try to put a halt to fossil fuel production on day one, we have to think about what effect that has on a lot of disadvantaged communities around the world.”
Langdale said insurance can serve as “a really good tool to take risk off the table in that transition process”.
“There has to be a moral metaphor of what you insure and what you don’t, but at the same time if it is too broad a brush you can end up forcing an unintended consequence,” he said.
Meanwhile, Andy Ponsford, head of Insurance and Funds UK, Barclays Corporate Bank, said ESG momentum would likely continue to build within the sector.
“There is a growing consensus that what we are seeing now is more permanent than what we have seen before,” he said.
“The Task Force for Climate Related Financial Disclosure has significantly increased reporting scrutiny, and increasingly objectives are being set that will reorientate capital flows more towards sustainable development and inclusive growth,” he said.
To learn more about ESG and how it is shaping the future global insurance industry, click the link below to watch the latest episode of Prospective. It includes a series of interviews with leading industry ESG experts…