Insurers must adapt to evolving ESG calls for – report

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Compared to Europe, the US insurance sector is still in the early stages of ESG integration, according to AM Best. The rating agency rated property and casualty, life / annuity and health insurers as well as reinsurers operating in the USA according to their ESG approaches and found that the priorities of insurance companies differed depending on the segment.

The responses from property insurers indicated that they were more focused on environmental risk, while life / annuity insurers said they were primarily focused on investment risk. Health insurers are placing greater emphasis on the social impact of health equity.

At the same time, all three US insurance segments placed a strong focus on corporate governance, according to the new Best’s Special Report “US Insurers’ Perceptions of ESG”.

“Survey results show that insurers believe there is risk in ignoring stakeholder pressures related to ESG factors.

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Other highlights of the report are:

  • Between 40% and 50% of US insurers and reinsurers surveyed and 51% of public companies versus 42% of mutuals are actively involved in ESG
  • More than half of respondents in the property and casualty and life / annuity sectors agree that proper understanding and integration of ESG factors are becoming increasingly important to the long-term viability of their business, compared with 39% in health insurance
  • Around 60% of the insurance and reinsurance industry is demanding more clarity from regulators, particularly when it comes to identifying, measuring and reporting ESG factors
  • Integrating ESG factors into the investment process appears to be ahead of underwriting. Less than 25% of respondents believe that it is extremely or very important for underwriters to consider ESG factors in the underwriting process

“Companies are evaluating how to incorporate ESG factors into their business models, but to be viable they must also identify and assess how those factors can impact their business from a risk perspective, while also identifying new opportunities,” said Jason Hopper, associate director of industry research and analytics at AM Best.

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