ESG Emerging

U.S. Insurers Seeing Need To Adapt To Evolving ESG Demands

Six in 10 U.S. insurance companies agree that demand from stakeholders to explicitly consider ESG factors in their decision-making is growing

New report from AM Best surveys rated property/casualty, life/annuity and health insurers and reinsurers operating in the United States on their approaches to ESG principals. To access the full copy of this report, please visit here.

OLDWICK, N.J.–(BUSINESS WIRE)–Compared with Europe, the U.S. insurance industry is still in the nascent stages of ESG integration. Given the developing perceptions of ESG, AM Best surveyed rated property/casualty, life/annuity and health insurers and reinsurers operating in the United States on their approaches to ESG principals, and found that carriers’ focuses vary by segment.

While property/casualty insurers’ responses showed that they focus more on environmental risks in their ESG engagement, life/annuity insurers said they concentrate mainly on investment risk, given the importance of yields, liquidity and asset-liability matching to their businesses. Health insurers have 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, according to the new Best’s Special Report, “US Insurers’ Perceptions of ESG,” the survey found that all three U.S. 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, AM Best.

Other report highlights include:

  • Between 40-50% of surveyed U.S. (re)insurers, and 51% of stock companies compared with 42% of mutual companies, are actively engaged with ESG;
  • Over half of the respondents in the property/casualty and life/annuity industries agree that proper understanding and integration of ESG factors is increasingly critical to the long-term viability of their business, compared with 39% from the health insurance industry;
  • Roughly 60% of the U.S. (re)insurance industry seeks greater clarity from regulators, particularly with respect to identifying, measuring and reporting ESG factors; and
  • Integration of ESG factors into the investment process appears to be ahead of underwriting. Less than a quarter of AM Best survey respondents in each segment believe it is extremely or very important for underwriters to consider ESG factors in the underwriting process.

“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,” said Jason Hopper, associate director, industry research and analytics, AM Best. A video discussion about the report with Hopper is available here.

 

 

 

AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.