Six in 10 US insurance companies agree that demand from stakeholders to explicitly consider environmental, social and governance (ESG) factors in their decision-making is growing, according to a new survey by AM Best.
Compared with Europe, the US insurance industry is still considered to be in the nascent stages of ESG integration, although AM Best reports that approaches to ESG vary significantly by segment even within this market.
Based on the survey data, property and casualty (P&C) insurers showed more focus on environmental risks in their ESG engagement, while life and annuity insurers concentrate more on investment risk, given the importance of yields, liquidity and asset-liability matching to their businesses.
Health insurers have also put greater ESG attention on the social impacts of health equity, which has been subject to added scrutiny during the pandemic, to eliminate disparities in health outcomes.
At the same time, AM Best found that all three US insurance segments are focused on corporate governance.
“Survey results show that insurers believe there are risks to ignoring stakeholder pressures related to ESG factors, and particularly with regard to diversity and inclusion, carriers generally view corporate governance as key to managing and mitigating reputational risk,” said Rosemarie Mirabella, director at AM Best.
Jason Hopper, associate director for industry research and analytics at AM Best, also commented: “Companies are evaluating how to integrate ESG factors into their business models, but to be viable they must also identify and assess how these factors can impact their business from a risk perspective, while also identifying new opportunities.”
