A joint study between international insurance broker, Howden and leading specialty insurer and reinsurer, Fidelis, shows that higher ESG ratings lead to better underwriting performance.
The study of loss ratios across 30,000 policies from both Howden and Fidelis’ datasets, comprising a premium value of around $9 billion against third party ESG ratings, is the largest study that has ever been conducted to date to establish the link between these factors.
According to the study, environmental ratings have the strongest correlation with loss ratios, but there is variation by line of business and industry. Of the multiple lines of business studied, property insurance shows the strongest correlation between better ESG scores and better loss experience.
Moreover, the study represents both Howden and Fidelis’ mutual desire to support the transition to a more sustainable future.
Both companies are working together to further examine the findings from the study, particularly focusing on exploring underlying causation, in order to enhance understanding and usability
David Howden, CEO, Howden Group Holdings commented: “It’s great to see the proactive approach that Fidelis and other insurers are taking to better understand the link between ESG profiles and risk. The data backs up our long-held belief that clients should be rewarded for high ESG credentials.
“This is an obvious way in which the insurance industry can support the transition. I hope to see, in the near future, ESG factors built in to underwriting processes and pricing decisions to a much greater degree.”
Richard Brindle, Chairman & Group Chief Executive Officer and Chief Underwriting Officer of Fidelis added: “This is a great example of the right thing to do also being the most profitable thing to do. Being able to articulate this link will become increasingly important to our interactions with key stakeholders, not least the investment community.”