Marsh has announced several enhancements to its directors and officers liability insurance offerings that could allow more clients to benefit from superior environmental, social and governance frameworks.
The enhancements signal a greater willingness among D&O underwriters to recognise organisations with strong ESG risk management as better risks, Marsh said. ESG has implications for several insurance lines, including D&O, which is designed to respond to shareholder, derivative, and event-driven litigation, along with regulatory actions.
Among the policy enhancements, Marsh has introduced “Side D” entity coverage for regulatory investigation costs relating to climate-related financial disclosures within its London carrier-backed Marsh Delta D&O facility. Clients not publicly traded in the US that score highly using established ESG risk methodologies – including Marsh’s ESG Risk Rating tool – are now eligible for the coverage, which is typically only available to entities after a securities lawsuit has been filed.
“Interest in our D&O ESG initiatives has been incredible,” said Paul Denny, global financial and professional liability practice leader at Marsh Specialty. “More insurers see the connection between good ESG risk management and fewer or less severe D&O losses and are willing to recognise those with superior frameworks with better coverage. This is great news for our clients, many of which have made building a strong ESG framework a priority for their organisations.”
The London market arms of D&O insurers American International Group, Berkshire Hathaway Specialty Insurance, Sompo International, Starr Insurance, The Hartford and Zurich have all agreed to participate in Marsh’s ESG D&O initiative. Under the initiative, US-based or US-listed clients that engage with certain international law firms to review, bolster and/or validate their ESG frameworks will be considered for preferred D&O policy terms and conditions on ESG-related exposures by participating insurers, subject to underwriting, Marsh said.
Marsh has also enhanced its Lloyd’s-backed Marsh Alpha D&O facility, which provides protection for individual directors and officers not indemnified by their corporation, known as “Side A” difference in conditions (DIC) coverage. Clients that score highly using established ESG risk methodologies may be eligible for extra reinstatement of policy limits, Marsh said.
Insurer Everest Bermuda has agreed to offer policy enhancements on Side A/DIC coverage for Marsh clients globally with superior ESG frameworks. Enhancements may include explicit coverage for chief sustainability officers, increased limits for independent board directors, and coverage for related fines and penalties.