A Marsh study has examined how UK insurers perceive environmental, social, and governance (ESG) risk when it comes to underwriting, insight into which is deemed by the broking giant as essential.
Based on a survey of 30 insurers in Britain, Marsh found that the underwriting models or rating tools of 38% of the respondents consider ESG factors, while 47% of the polled insurers use external rating providers to help assess the ESG performance of their clients.
Meanwhile, a whopping 100% expect ESG factors to play a bigger role in underwriting processes in the future. Additionally, 79% are open to offering some form of incentive for positive ESG metrics. Possible benefits include additional capacity, favourable terms and conditions, and premium credits. Nearly half (47%) would offer all three.
“The ESG landscape is evolving quickly, and these insights give a strong indication of insurers’ direction of travel,” stated Marsh. “There will, of course, be variability in approach, appetite, and application across different product lines and regions – and even within the same global carriers – as insurers establish an ESG strategy across their various line underwriters.
“It is also important to stress that not all underwriters are currently considering ESG factors and, within certain industry and segments of the portfolio, ESG is yet to make its way to the forefront. Despite there being no market-wide approach at present, all respondents indicated that they envisioned some form of unified approach in the future.”