Best’s Briefing: Considering Environmental, Social and Governance Factors from a Credit Rating Perspective
The Best’s Briefing, titled, “Considering Environmental, Social and Governance Factors from a Credit Rating Perspective,” states insurers and reinsurers are facing consumer demands that they take positions on issues ranging from climate change to gender equality. In addition to elevated public interest, companies are under pressure from non-government organisations and regulatory authorities, particularly in
The report states ESG risks vary by industry and are considered material when it is likely that companies will incur substantial financial costs in connection with them. For insurers, perhaps the most obvious risk is climate change, which has the potential to lead to an increase in the severity and frequency of severe natural catastrophe events. Conversely, ESG opportunities focus on a company’s ability to identify and capitalise on relevant challenges for profit, such as developing new products for the renewable energy sector.
With no industrywide ESG standards in place, it can be overwhelming for insurers and reinsurers, particularly small- to medium-sized entities, to understand fully how to implement and disclose ESG practices. Although there has been significant progress in the harmonisation of methodologies and standards, further improvements concerning the definition of key metrics and educating users on the importance of ESG in financial analysis are still required.
To access a complimentary copy of this briefing, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=277538.
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Jessica Botelho, CA, +44 20 7397 0310
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