Oxbow Partners publishes landmark ESG report

May 23, 2022 Miqdaad Versi

Oxbow Partners, a specialist management consultancy for the insurance industry, in partnership with the Bermuda Business Development Agency (BDA), is today launching a landmark report assessing the maturity of ESG in the Bermudian (re)insurance market at the BDA’s Bermuda Climate Risk Summit.

The study highlights the advances made by Bermudian (re)insurance companies and improvement opportunities available to them. Based on in-depth interviews with over 20 large Bermudian (re)insurers and ILS funds representing GWP of over $100bn and an investment portfolio over $550bn, the report is the first of its kind.

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Entitled ESG in Bermuda: The Rising Tide – The maturity of ESG on the island and what it means for the (re)insurance industry, the report’s key findings include:

Bermuda is well placed to tackle the ESG challenges within (re)insurance: The report’s assessment is that the Bermudian insurance industry genuinely wants to make an impact on ESG matters rather than just ticking the boxes or responding to outside pressures. All participants are seeking to improve their internal ESG credentials – to ‘walk the walk’ rather than just ‘talk the talk’. Bermudian carriers have the required technical capability, and the regulator is perceived as a pragmatic facilitator.

The overall Bermudian market is at an early stage in its ESG journey: 72% of companies have started engaging with ESG topics but are at the early stages of their ESG journey, whilst 14% have a developed ESG approach. However, another 14% had not taken any formal action. This is not unusual internationally. Most participants saw Bermuda as being ahead of much of the globe, including the US – even if perhaps trailing some parts of Europe.

Investors and shareholders are the biggest drivers of ESG, while lack of resource is the biggest barrier to ESG development: Investors and shareholders were cited as the main driver of ESG (mentioned by 86% of participants), closely followed by employees (81%). 38% mentioned internal management, ahead of regulators at 29%. 71% see resource as the limiting factor, with 67% of those with ESG resource having less than two FTE.

On insuring more of the world’s risks, Bermuda was trailing the global leaders in Europe: Only a limited number of Bermudian market players have thus far been prominent players in working actively on solutions for developing markets, including microinsurance and parametric triggers. Despite being the global leader in ILS funds, the Bermuda market risks falling further behind without more comprehensive participation.

Bermudian carriers are yet to develop sophisticated approaches to incorporating ESG into underwriting: Whilst some carriers (32%) have an element of ESG incorporated into underwriting processes (mainly a simple exclusion to risk appetite), only a very small number were starting to develop more holistic approaches such as net-zero underwriting. Many were wary of blanket exclusions and preferred supporting a transition. 92% of participants who had not done so already said they intended to integrate ESG into their underwriting approaches in the future.

A more developed ESG approach to investment was common: 47% of participants have integrated ESG into their investment process in some way, with many outsourcing investments to asset managers signed up to the Principles of Responsible Insurance.

Internally, most have some environmental policies and track DEI metrics: A majority of firms (76%) have implemented environmental policies, with office impact reduction and recycling the most typical. 19% have specific carbon offset policies in place. 76% of (re)insurers and ILS funds had put a DEI policy in place. Of those with a policy, 81% tracked these metrics internally. However, fewer had gone on to publish these (44%).

Bermudian (re)insurers need to improve their storytelling and become comfortable with greater disclosures: Many Bermudian (re)insurers have done significant work on ESG but are yet to document or disclose their progress. As the SEC increases disclosure requirements, with the BMA expected to follow, standardised disclosures will become more commonplace. 71% of participating Bermudian (re)insurers have ESG pages on their website, but only 52% have published an ESG or sustainability report in line with at least one recognised industry standard (mostly TCFD).

Providing context to the report, Miqdaad Versi, its author and head of ESG for Oxbow Partners, said: “Many of the ESG scoring tools and polls of ESG adoption have only scratched the surface of how (re)insurers are engaging with ESG. For example, on the environment, they often simplistically prioritise blanket exclusions rather than recognising the value of supporting a transition. We are hopeful this extensively researched report across the key elements of our ESG framework provides the nuance required to better understand (re)insurers’ strategies, the trade-offs they are facing, and the next steps needed. ESG is no longer an optional side project for large companies’ sustainability teams. Every (re)insurer on the island needs to consider how they will better embed ESG across all parts of their business.”

Stephen Weinstein, chair of the Bermuda Business Development Agency, added: “The BDA is pleased to help bring this important paper forward at this critical time for the implementation of ESG principles and frameworks in investment, business and public policy strategies. As the Bermuda market continues its aspirations as a centre of excellence and advocacy for climate resilience, climate finance and ESG-branded business and investment strategies, this report is both a useful accelerant tool and valuable future reference point. As the survey reflects, while both challenges and opportunities lie ahead, Bermuda as a jurisdiction has much to be proud of in terms of ESG values and implementation. We thank our partners at Oxbow Partners for their impressive efforts researching and generating this report; the team at BDA who supported it; and most importantly, our survey participants, for generously donating their valuable time, expertise and insights.”

As Bermuda looks to its future, the Bermuda Business Development Agency and Oxbow Partners have jointly coordinated this study in the belief that greater transparency over ESG activity in the market will allow all members of the Bermudian ecosystem to refine and accelerate their strategies. We hope you find the report valuable.