Gillian Davidson, Global Insurance Law Connect’s (GILC) Chair, highlighted the increasing importance of Environmental, Social, and Governance (ESG) considerations for insurers and the wider business community.
In the fifth edition of GILC’s annual ‘Risk Radar Report’, Davidson noted that ESG factors were significantly influencing the insurance industry, driven by new regulations and stakeholder activism, while also impacting the availability of coverage for directors, officers, financial institutions, and professional indemnity policies.
The consensus among member firms of Global Insurance Law Connect suggested that the insurance industry is acknowledging the potential benefits of embracing appropriate ESG policies, such as significant growth opportunities, long-term value creation, and enhanced risk management.
However, Davidson emphasised that while progress has been made, more efforts are needed to fulfill governance and climate change risk assessment obligations.
ESG-related challenges are not limited to insurers alone but also affect businesses across various sectors. Organisations heavily reliant on carbon-intensive production, for instance, are encountering difficulties in obtaining insurance options.
Moreover, underwriting business for frequent and severe natural catastrophe events has become increasingly challenging in many regions worldwide. Against a backdrop of geopolitical risks, supply chain disruptions, and inflationary pressures, organisations are grappling with striking the right balance between ESG investments and managing rising costs.
Davidson further highlighted the need for insurers and businesses to adopt a forward-thinking approach in the ongoing debate surrounding ESG. It is no longer solely about mitigating risks; instead, it calls for adapting our way of living.
Insurers have a pivotal role to play in this transformative process by being early adopters of ESG best practices and aligning their policies with ESG principles.
“One of our member firms emphasised the importance of taking the right stance in the current debate, citing that it is no longer just about mitigation but adapting our way of living. Insurers can contribute to this transformation by being early adopters of ESG best practices and supporting ESG principles in their policies.”