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UK insurers to increase ESG scoring in underwriting

Marsh survey of 30 UK insurers also reveals ESG will have a significant impact on insurers’ risk selection over time as carriers become focused on supporting higher-scoring ESG organisations

One-third of insurers currently consider ESG factors in their underwriting models and rating tools, Marsh survey finds 

UK insurers expect environmental, social and governance (ESG) factors to play a greater role in underwriting in the coming years, with more than one-third of carriers already considering ESG in their risk assessments, a new survey has found.

Some 38% of UK insurers said they currently consider ESG factors in their underwriting models and rating tools, according to the survey by Marsh.

In addition, nearly half of the respondents (47%) suggested they were using external rating providers to help assess their clients’ ESG performance.

All respondents to the survey said they expect ESG factors will play a bigger role in the underwriting process in the future.

Currently, many carriers focus primarily on the environmental aspect of ESG – and climate specifically. But as maturity and understanding in the ESG space grows, this focus may change, Marsh said.

The survey of 30 UK insurers also revealed ESG will have a significant impact on insurers’ risk selection over time as carriers become focused on supporting higher-scoring ESG organisations.

Nearly eight out of 10 respondents to the survey said they would offer some form of incentive for positive ESG metrics, such as premium credits and favourable terms and conditions.

All insurers said they were working on their specific underwriting requirements for ESG with regard to climate disclosures.

Marsh said the survey showed the “direction of travel” for insurers in term of using EGS metrics to assess underwriting risks. “There will, of course, be variability in approach, appetite, and application across different product lines and regions – and even within the same global carriers – as insurers establish an ESG strategy across their various line underwriters,” Marsh said.

The broker added not all underwriters are currently considering ESG factors and, within certain industry and segments of the portfolio, ESG is yet to make its way to the forefront. “Despite there being no market-wide approach at present, all respondents indicated they envisioned some form of unified approach in the future. We have also conducted similar conversations with carriers outside the UK and the lack of a unified approach is a common trait globally,” Marsh said.

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