EDITOR’S LETTER
ESG is part of the zeitgeist—and it is here to stay
“The arguable pioneer of the concept is Parhelion, which claimed the title of the world’s first fully sustainable insurer in its June launch.”
There will be plenty of re/insurance executives who thought that environmental, social and corporate governance (ESG) considerations, which have been so widely debated and come to such prominence in the industry in the past 12 months, might have been a passing fad—a new version of corporate social responsibility that would generate headlines for a while and then disappear into oblivion again.
It looks as though they will be wrong. It now seems that ESG, however you feel about the abbreviation, is less a fad and more something approaching part of the zeitgeist that will have a very real and tangible impact on the industry for some time.
A game-changer in the importance of ESG for many will not be the climate protesters that have targeted Baden-Baden again this year or, indeed, the growing pressure on the industry by campaigners in a broader sense; it will be the fact that many reinsurers and cedants will start asking for such information in direct reference to renewals negotiations.
Speaking in an interview in yesterday’s newsletter, Mike Van Slooten, head of business intelligence for Aon’s Reinsurance Solutions, made this exact point. He said that, for the first time, he expects the ESG credentials of both cedants and reinsurers to be requested as part of negotiations as both parties seek more detail on the underlying risk and their counterparties.
Reinsurers, he noted, are under pressure from shareholders to review and get better visibility on the underlying risks. Equally, insurers are under pressure from their home regulators to examine their own ESG goals and credentials—and this extends to the companies they do business with, including their reinsurers.
His comments were published on the same day that Beazley secured approval from Lloyd’s for a new syndicate that will focus exclusively on offering additional capacity to businesses that perform well against ESG metrics. The launch is the latest such release: the arguable pioneer of the concept is Parhelion, which claimed the title of the world’s first fully sustainable insurer in its June launch.
While these businesses have set up their entire identity around the concept of embracing ESG, most other re/insurers are now getting in on the act too. You will struggle to find a risk transfer business now that has not unveiled some element of strategy or initiative designed to prove its credentials, be it around decarbonisation, managing climate change or embracing ESG in its broadest sense.
Many re/insurers went as far as appointing ESG officers this year. That is a new role, the remit of which seems to vary—for now. But the commitment to the idea of ESG is clear.
As re/insurers dive ever-deeper into negotiations around this year’s renewal, few conversations will take place without this topic being raised. Some will need only tick boxes, others will go further. Whatever the approach, things are changing and in the renewals of the future the metrics around ESG could well take centre-stage.
Wyn Jenkins is the managing editor of Intelligent Insurer
Image: shutterstock.com / Love Solutions
