Best’s Special Report: Insurance Industry Becomes Active in the Development of the Environmental, Social and Governance Agenda

LONDON--(BUSINESS WIRE)-- A number of major participants in the (re)insurance industry have become actively involved in shaping the environmental, social and governance (ESG) agenda – given their unique role as risk managers, institutional investors, and risk carriers on behalf of a wide range of industries. They also face critical risks and opportunities associated with climate-change trends and challenges to close the protection gap, according to a new A.M. Best report.

The Best’s Special Report, “Insurance Industry Becomes Active in the Development of the ESG Agenda”, states that publicly listed multinational insurance groups are well aware of shareholders’ expectations and try to align their long-term investment and underwriting strategies accordingly. Increasing public awareness puts pressure on all types of financial institutions to consider ESG factors and their potential impact on reputational and operational risks. This is reinforced by regulatory developments with an increased focus on ESG issues, such as the inclusion of climate-related, non-financial disclosures to facilitate informed decisions.

This report details the way A.M. Best considers material ESG factors as part of the ratings assessment and how they impact Best’s Credit Rating Methodology’s (BCRM) building blocks – balance sheet strength, operating performance, business profile and enterprise risk management.

Carlos Wong-Fupuy, senior director, A.M. Best, said: “With no industrywide ESG standard in place, it can be overwhelming for companies to understand fully how to implement and disclose ESG practices. While A.M. Best does not explicitly consider ESG in BCRM, components of ESG are found throughout the building blocks described in the BCRM. A.M. Best will continue to monitor ESG and other emerging risks as part of its ongoing credit analysis of the insurance industry and will provide additional transparency to its criteria as it specifically relates to ESG, if needed.”

The report states regulators are taking an active role in ESG. In the United Kingdom, the Bank of England has flagged the insurance sector as a key part of the economy that is heavily exposed to the physical, liability and transition risks arising from a climate-changing environment. Meanwhile, the European Union Commission has published a number of concrete action plans aimed at channelling investments into environmentally sustainable activities.

Yvette Essen, director of research, said: “ESG topics are increasing in importance, not only for multilateral organisations and regulators, but also for the financial community and the public in general. A number of major insurance groups are already taking a leading role on ESG issues. Access to better quality information will allow market participants to understand and manage these risks more effectively.”

To access the full copy of this special report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=279430.

A.M. Best is a global rating agency and information provider with a unique focus on the insurance industry. Visit www.ambest.com for more information.

Copyright © 2018 by A.M. Best Rating Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.

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A.M. Best

Carlos Wong-Fupuy, +44 20 7397 0287

Senior Director

carlos.wong-fupuy@ambest.com

or

Yvette Essen, +44 20 7397 0322

Director, Research, Communications and

Media – Europe, Middle East & Africa

yvette.essen@ambest.com

or

Edem Kuenyehia, +44 20 7397 0280

Director, Market Development &

Communications

edem.kuenyehia@ambest.com

Source: A.M. Best