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ESG data collection 'has no direct impact on underwriting'

While many re/insurers are now capturing ESG data they are still unsure of how to use it, the report says, with most re/insurers still trying to understand the ESG impact at a portfolio level

Brokers want more consistency and transparency from insurers on how client ESG data is being used, a new study has found

Environmental, social and governance (ESG) data is yet to have a direct impact on underwriting other than through the imposition of blanket exclusions on certain industries, new analysis has found.

While many re/insurers are now capturing ESG data they are still unsure of how to use it, the report from the Better Insurance Network and management consultant Oxbow Partners said.

Although some were in the process of embedding ESG data assessments, maturity varied significantly between companies and by class, with most re/insurers still trying to understand the ESG impact at a portfolio level.

The only direct way ESG was having a direct influence on underwriting decisions was through the blanket exclusions placed on certain industries, including thermal coal and tar sands.

Despite this, re/insurers universally favoured supporting clients in transitioning rather than excluding companies with poor ESG ratings, the report found.

But the analysis also highlighted a lack of understanding among brokers and clients about how client ESG data is being used, with both “growing frustrated” over the lack of consistency in how insurers approach capturing that data.

It called for standardisation across the market to address the inconsistency of questions sets clients and brokers receive from underwriters.

“Improving the quality of ESG data for underwriting is vital to enable re/insurers to better understand the ESG risks, opportunities and impacts within their portfolios,” Antony Ireland, founder of Better Insurance Network, a professional network focused on sustainability, said.

“Greater collaboration between stakeholders is urgently needed to standardise ESG data capture and implementation, which will in turn build greater trust and transparency between underwriters, brokers and insureds on ESG.”

This was echoed by Miqdaad Versi, partner at Oxbow Partners, who said better data was needed to embed ESG into underwriting.

“The question for many re/insurers is not whether to acquire and incorporate ESG data into their underwriting processes, but how to do it in a way that aligns with the outcomes they are seeking and their overall ESG strategy,” Versi said.

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