With environmental, social and governance (ESG) playing an increasingly important role in the re/insurance market, analysts at Aon have argued that setting clear and transparent ESG targets will be critical for companies during their renewals.
Aon cited research that shows ESG based assets could exceed US$53 trillion by 2025, representing more than a third of total assets under management.
What’s more, the ability to access the insurance markets is also increasingly reliant on ESG performance for an industry that’s ever more conscious of its optics and social responsibilities.
Being able to show a plan for improvement will therefore help facilitate continued partnership with carriers, Aon says, meaning firms will have to build time to consider ESG into renewal schedules.
Aside from renewing their existing programmes, businesses might also ask what the insurance markets are doing to help them mitigate and manage the new risks that ESG presents.
There are some areas where traditional coverage addresses ESG ‘event based’ incidents like pollution, public and product liability, directors’ and officers’, and health insurance.
But Aon believes that many of the trend-based risks that are emerging within ESG are areas where the industry needs to become more creative about solutions to satisfy unmet needs and plug a growing protection gap with risks like climate change, community impacts, and business transparency and resilience.
“Companies need to do their bit to showcase their burgeoning ESG credentials to secure both future investment in their businesses as well as competitive risk transfer options on their traditional risks, but they’ll also be expecting the insurance industry to innovate to help them transfer new risks emerging from ESG factors,” the broker stated.