Best’s: ESG Bond Issuance By Insurers May Continue To Grow

Insurers and reinsurers, with their unique societal role as risk managers, risk carriers and investors, have not been immune from the growing awareness and concerns about climate change.

The impact of increasing weather volatility seen in insurers’ income statements makes environmental and climate change a direct consideration in the underwriting process. In addition, elevated public interest is compelling companies and investors to adapt and consider environmental, social and governance (ESG) risks and opportunities in their operations.

In a new Best’s Commentary, “Green and Sustainability Bond Issuance by Insurers May Continue To Grow,” AM Best notes that in addition to insurers expanding their role with regard to green initiatives, the issuance of green debt by insurance companies is part of an ongoing trend of insurers increasingly taking an active role in addressing environmental considerations.

Michael Dunckley, associate director, analytics, said, “Although insurers currently account for a very small proportion of the total issuance of the ESG bond market, given the strong reception these issues have had, other insurers around the globe may begin issuing more such bonds.”

The commentary also notes that national efforts to accelerate green initiatives could provide incentives for green bond issuers, gaining them access to a broader field of investors, which creates more competition at placement and could result in lower financing costs.

Jessica Botelho-Young, senior financial analyst, adds, “A further benefit of green bonds is the likelihood they will enhance a company’s public image through its green credentials. Insurers that have issued green bonds to date have large retail operations and are keen to boost their brands’ perception and goodwill.”

To access the full copy of this commentary, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=290571.

AM Best is a global credit rating agency and information provider with an exclusive focus on the insurance industry. Visit www.ambest.com for more information.

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