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Cover The Gap: As ESG risks grow, how can the insurance industry respond?

Insight Sep 07, 2022

Extreme weather events — from torrid heatwaves across Europe to devastating floods in South Asia to widespread droughts — have made clear the human and economic costs of climate change for all industries, including the insurance industry.

So, let’s take a look at what has been discussed in the industry this past month as insurers strive to achieve their Net-Zero targets and increase the focus on the “E” (environment) in their ESG strategies.

🔙 A Quick Look-Back

Prior to exploring the solutions, it is necessary to examine the changes needed to meet climate challenges as a first step. It is pointed out that there is still inconsistency in reports and data issues, though there are some signs of progress.

WTWO shared eight tips that could help insurers advance their ESG agenda, from exploring the definition of ESG to changing perspectives – capturing opportunities arising from ESG issues instead of simply seeing them as risky.

EY also dived deeper into the importance of financial leaders in insurance companies. Specifically, how they could work with risk, actuarial, and business leaders to help identify the greatest threats and growth opportunities associated with ESG.

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4 ways insurers can develop ESG strategies

For more tips on ESG, this article from IXT Prime offers additional insights on how to advance your ESG strategy:  

  • Appoint and empower CSOs: Appoint Chief Sustainability Officers (CSOs) or their equivalent to help form and lead the company’s ESG strategy. By involving them, you will avoid closer regulatory scrutiny and won’t lose the support of stakeholders who are invested in ESG issues.
  • Enhance reporting and metrics: CSOs will need metrics that can express the ROI in more vivid terms to get a better grasp of issues, such as global warming, and apply that understanding to make more informed judgments.
  • Ensure transparent communication to all stakeholders: Insurers need to maintain transparent communication with all relevant stakeholders and display an understanding of which ESG element speaks most directly to different stakeholders rather than sending a broad message.
  • Understand that ESG and digital transformation go hand in hand: Without the digital tools necessary to collect data and establish processes around ESG governance, most efforts are likely to fail.

Read more on IXT Prime

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