Climate Summit
Good intentions: Bermuda has a real desire to deliver on ESG
Bermuda’s re/insurance industry genuinely wants to make an impact on ESG matters rather than just ticking boxes or responding to outside pressures, according the Island’s first ESG benchmarking survey.
“The Bermudan industry is at the forefront of discussions at the Insurance Development Forum about how to improve resilience in developing markets.”
BDA-Oxbow report
The survey is the basis of a new report—“ESG in Bermuda: The Rising Tide”—produced by the Bermuda Business Development Agency (BDA) in partnership with consultancy Oxbow Partners “in the belief that greater transparency over environmental, social and corporate governance (ESG) activity in the market will allow all members of the Bermudan ecosystem to refine and accelerate their strategies”.
The survey is based on interviews with executives from 21 firms on the Island. It found that 72 percent of those companies have started engaging with ESG concerns and are at the early stages of their ESG journey, with a further 14 percent having a developed ESG approach. However, 14 percent said they had not yet taken any formal action on ESG.
Participants highlighted many strengths of the Bermudan market that can be leveraged to push forward the ESG agenda. For example, the Bermudan industry is at the forefront of discussions at the Insurance Development Forum about how to improve resilience in developing markets. Some 86 percent of participants believed Bermuda’s expertise in natural catastrophe risk transfer would allow the industry to drive environmental issues forwards.
Many commented on the long history of corporate philanthropy on the island, including charitable, voluntary and educational schemes. The Bermuda Monetary Authority’s (BMA) pragmatic approach to regulation was also cited as a strength. Some 43 percent see ESG as an opportunity, whereas only 19 percent see it as a risk.
All but one of the 21 companies were willing to disclose their participation in the survey. They are: Aeolus, AIG, Ariel Re, AXA, African Risk Capacity, Argo Group, Aspen, Axis, Everest, Fidelis, Global Atlantic, Hamilton, Hiscox, Integral ILS, Kettle, Nephila, RenaissanceRe, SiriusPoint, Sompo, and Vantage.
“Regulators and policymakers, including the BMA, must drive the discussion forward.”
Butch Bacani, UNEP-FI
What Bermuda says, matters
The term ESG was coined by the UN Environment Programme Finance Initiative (UNEP-FI), as a better way of understanding factors which were not traditionally included in financial decision-making.
UNEP-FI works with banks, insurers and investors to create a sustainable finance sector. They are responsible for creating the Principles for Sustainable Insurance (PSI) in 2012, to which a handful of Bermuda re/insurers are signatories. Since then, there have been a number of important initiatives which remain the cornerstones of UNEP-FI’s approach on ESG for the re/insurance ecosystem.
“The Principles for Responsible Investment addressed the problem that sustainability meant different things to different investors and demonstrates the materiality of ESG as a legitimate risk input for financial markets,” UNEP-FI programme leader Butch Bacani says in the BDA-Oxbow report.
“The higher-level set of PSI has been developed for the industry, which is often misinterpreted as being just for underwriting. The ESG guide for non-life insurers took years to develop and is a comprehensive view of how to systematically embed sustainability into insurance.”
On the role of insurance in ESG, Bacani said many people see insurance primarily as a “financial shock absorber” when it comes to ESG, but the expertise around risk and resilience is an undervalued asset in the industry.
“The PSI have helped develop the narrative from merely dealing with the impact of climate change to actively closing the protection gap, promoting resilience and understanding of how insurers can influence and mitigate against the root causes,” he said.
“Insurers cannot just think about insured risks but must also develop products such as microinsurance. They need to help facilitate decarbonisation by stewarding the transition of portfolios in the real economy and develop methods to incentivise resilience.
“What Bermuda says, matters. Any major risk capital like Bermuda has significant influence and should, by default, be a leader in championing the sustainable insurance agenda. It has promoted a very positive narrative on resilience—an area where it can be a world leader. However, as in all risk capitals, there is room for improvement.
“Bermuda lags Europe on many areas related to ESG and much more can be done. Regulators and policymakers, including the BMA, must drive the discussion forward and support the important ESG leadership demonstrated by many re/insurers in the market.”
